C. Robert Taylor

Deterministic versus stochastic evaluation of the aggregate economic effects of price support programs

Abstract Economic effects of agricultural policies estimated with deterministic models may be biased because certainty equivalent requirements are not satisfied in the agricultural sector. This article compares numerically estimated expected values of key aggregate economic variables for two levels of target prices (i.e. supported price level) from deterministic and stochastic formulations of AGSIM, which is a large-scale econometric simulation model of crop and livestock production in the United States. For nominal target prices set by the 1990 Food, Agriculture, Conservation and Trade Bill (FACT), the deterministic formulation underestimated the level of deficiency payments (the difference between target price and market price) by a cumulative total of

Long-term planning on a corn-soybean farm: A dynamic programming analysis

800 million (6·2%) over the 5 year life of the Bill compared to estimates from the stochastic model. For target prices 10% below the FACT levels, the deterministic model underestimated deficiency payments by

Effects on a Corn-Soybean Farm of Uncertainty about the Future of Farm Programs

1220 million (36·8%). Much of the economic impact estimation bias can be attributed to price received by participating producers under FACT having a probability distribution truncated at the target price, which is a strong departure from the certainty equivalent requirements needed to have mean outcomes from stochastic models equal outcomes from their deterministic counterpart. Estimated changes in deficiency payments from lowering target prices by 10% were overestimated by

United States agriculture and the general economy: Modeling their interface

420 million (4·3%) with the deterministic model, which suggests that deterministic models are less biased for estimating the change in deficiency payments than in estimating the level of payments. The bias associated with mean values of other variables, such as crop prices and farm income, was much less in percentage terms than bias in estimates of deficiency payments.

Indirect Damages from Price Fixing: The Alabama Lysine Case

Abstract A dynamic programming model was used to develop an optimal long-run farm plan for a representative corn and soybean farm. Results indicate that under the new triple-base provisions of the 1990 Farm Bill, planting soybeans on a portion of the corn base is an attractive alternative when the profitability of corn and soybeans are about equal. Contrary to expectations, the triple-base provision may result in fewer soybean acres planted under certain price conditions.

An analysis of alternative cropping decision rules

Dynamic programming techniques are used to evaluate effects of uncertainty about continuation of farm programs on planting decisions during the last year of the 1990 Farm Bill. Results indicate farm-level decisions are affected by uncertainty only when the farmers subjective probability of the continuation of farm programs is very low. The optimal value functions in different versions of the model can also be used to estimate the implicit value of base acreage.

FINITE MIXTURE ESTIMATION OF SIZE ECONOMIES AND COST FRONTIERS IN THE FACE OF MULTIPLE PRODUCTION TECHNOLOGIES

Abstract Models of the US farm business sector typically assume specific trends in the macroeconomy when projecting economic impacts. Implicit in the use of exogenized macroeconomic variables is the assumption that events taking place in agriculture do not affect the macroeconomy. This assumption may not be valid for major shocks to the farm business sector or to the general economy. This article presents an overview of the linkages between the US farm sector and the general economy that underlie AG + GEM, which is a large-scale econometric-simulation model. Estimates of the aggregate economic impacts of banning most agricultural pesticides are presented to illustrate macroeconomic linkages.

ECONOMIC IMPACTS OF REDUCED CHEMICAL USE

Indirect damages to broiler and pork producers fromsupra-competitive pricing of synthetic lysine, whichis an important feed additive, are discussed in thisarticle. Indirect damages occur in fundamentallydifferent ways in the two industries because thebroiler industry is vertically integrated while thepork industry was dominated by independent producersduring the 1992–1995 time period. Pass-through ofhigher lysine prices to hog feed purchasers isdemonstrated with regression analysis of purchasesof a feed premix containing synthetic lysine and aregression analysis of purchases of synthetic lysinefrom feed dealers.

Aggregate economic effects of CRP land returning to production

Abstract The research reported here measures the effects on the probability distribution of the present value of after-tax income of several different cropping decision systems in Alberta. Dynamic flex-cropping decision rules generate higher levels of returns and less downside risk than all other alternatives considered here. Dynamic decision models which ignore taxes and the stochastic dynamic nature of prices produce suboptimal results relative to models which consider these factors and relative to a fixed rotation decision rule. This suggests that careful attention must be paid to the factors included in these models if they are to generate rules which will improve the risk-return trade-off for farm managers.

Population dynamics and interactions between plant parasitic and non-parasitic nematodes: An empirical analysis

Finite mixture estimation (FME) is compared to estimated generalized least squares (EGLS) in the estimation of economies of size and production cost frontiers for Alabama dairy farms. FME provides several unique insights into the economic forces behind recent changes in Alabamas dairy industry. FME provides estimation of a stochastic average cost frontier with known statistical properties, which it was not otherwise possible to obtain using available stochastic frontier estimation packages.