Henry W. Kinnucan

Asymmetry in Farm-Retail Price Transmission for Major Dairy Products

An econometric model is used to estimate the net relationship between changes in the farm-level price of milk and changes in the retail prices of four major dairy products—fluid milk, butter, cheese, and ice cream. Results indicate that the farm-retail price transmission process in the dairy sector is asymmetric. Retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases. The role in pricing asymmetry of retail demand versus farm supply shifts is tested via a Chow-type test. Asymmetry is tested using the Houck procedure for estimating nonreversible functions.

Effects of Health Information and Generic Advertising on U.S. Meat Demand

The dominant pattern in U.S. meat consumption over the past two decades has been a steady increase in per capita poultry consumption, largely at the expense of beef consumption. Our findings suggest that the major factor governing this pattern is structural change. Specifically, health information or trend was found to be significant in each of the four equations estimated in the Rotterdam system. Moreover, the health-information elasticities in general are larger in absolute value than price elasticities, which suggests that small percentage changes in health information have larger impacts on meat consumption than equivalently small percentage changes in relative prices. The estimated effects of generic advertising, in contrast, were found to be modest and fragile. Copyright 1997, Oxford University Press.

Seasonality in the Consumer Response to Milk Advertising with Implications for Milk Promotion Policy

Permitting seasonal variation in the goodwill effect in measuring the impact of fluid milk advertising on milk sales in New York City improved the statistical significance of the estimating equation. The allocation of generic advertising dollars according to optimization rules during the period 1979–81 would have resulted in a 9 percent increase in returns to dairymen supplying the New York City market. Harmonic variables are used to account for seasonality, a Pascal distribution is used to account for the decay structure, and goodwill elasticities are estimated to indicate the impact of generic advertising on sales.

Media-specific returns to generic advertising: The case of catfish

A key decision faced by managers of generic advertising programs is the allocation of the budget among media (e.g., television, radio, print). In this article, the economics of media allocation are addressed using catfish as a case study. The hypothesis that demand responds equally to all media was rejected. Further analysis indicated that the media with relatively modest expenditures (newspapers and television) had no reliable effect on demand, which suggests that scale is important. Losses sustained from the apparently ineffectual media were more than offset by gains from the effective media (magazines and radio), so that returns overall, net of opportunity cost, were positive. The historical media allocation, however, was inefficient in the sense that a different media mix would have resulted in greater industry profits.

Optimal Control of Fish Growth

Fish culture is an efficient means of protein production. However, in contrast to land animals, fish cannot be fed ad libitum because feed not consumed within a few hours is decomposed. This paper presents a bioeconomic model for determining cost-effective feeding regimes for pond-reared fish. The interplay among feed allowance, diet quality, and harvest date is explored. The optimal control model used is flexible, incorporates the effects of water temperature on fish appetite, and can be used to gain insight into efficient management of aquacultural production systems in different geographical regions.

The Effects of Exchange Rates on Export Prices of Farmed Salmon

The CBS inverse demand system is extended to include exchange rates. Applying the extended model to trade data for farmed salmon, results suggest export prices are at least as sensitive to changes in exchange rates as to changes in trade volume. Exchange rate pass-through (absorption into export prices) is complete for the Chilean peso and the British pound, but incomplete for the Norwegian kroner and the US dollar. This suggests producers in Chile and the United Kingdom (UK) are more affected by short-term movements in relative currency values than are producers in Norway and Rest of World (ROW). Model simulations suggest currency realignments, especially the depreciation of the Chilean peso, contributed to the 2003-04 collapse in world salmon prices.

Wholesale- and farm-level impacts of generic advertising: The case of catfish

A four-equation econometric model of the US catfish industry is estimated to determine the impacts of industry funded advertising on the wholesale and farm levels of the market. Results suggest that, despite the market power held by middlemen, the compaign has increased quasi-rents to producers. The relatively large benefit-cost ratios (about 13:1), however, are attributed primarily to the price effects of the campaign. This highlights the importance of supply response in evaluating the economic effects of industry (generic) advertising programmes. Elasticity estimates based on 1980–89 monthly data are: farm-level supply, 0.15; wholesale-level demand, -1.01; farm-wholsale price transmission, 0.68; and advertising, 0.0075.

News and Volatility of Food Prices

Financial markets exhibit an asymmetric news effect with unexpected low prices generating more price volatility than ‘news’ of high prices. The present study examines US food markets for such asymmetric news effects. Analysis of 25 years of monthly data for 45 retail food items shows that price news destabilizes about a third of the markets with unexpected price increases more destabilizing.

Bioeconomic analysis of fish growth: effects of dietary protein and ration size.

Abstract Computer experiments were performed with a bioenergetic model for channel catfish ( Ictalurus punctatus ) to determine the nature of interactions between ration size and dietary protein from biological and economic standpoints. Both ration size and dietary protein exhibited decreasing magrginal products, as expected from the law of diminishing returns. Dietary protein has a positive effect on feed efficiency (except at combinations of high protein and high rations), while ration size did not seem to affect protein efficiency. Isoquant analysis showed that dietary protein and ration size are substitute inputs within a certain range, implying that the same harvest weight can be obtained by feeding low protein diets at high rations or high protein diets at low rations. Cost was minimized with dietary protein ranging from 26.5 to 34.2% of the diet and rations ranging from 0.79 to 1.0 of satiation, depending on the protein non-protein price ratio of the diet.

Effects of income growth and tariffs on the world salmon market

The effects of income growth and tariffs on salmon prices, production, and trade flows are analysed using total elasticities derived from an equilibrium displacement model of the world salmon market. Results suggest the total income elasticity in world trade for salmon is about one, which means imports worldwide will grow at about the same pace as world income. However, owing in part to policies that restrict supply response, not all exporters will share evenly in this growth, with UK producers benefiting the most and Norwegian producers the least. Within importing countries, imports are more responsive to income growth than is domestic production, which means protectionist pressures are apt to increase with affluence. US tariffs on imports from Norway and Chile are counterproductive in that they reduce world imports with little effect on the US price. Norways feed quota reduces the efficacy of US tariffs, makes imports less responsive to income, and increases price volatility. Hence, quota elimination may yield producer benefits in excess of producer losses associated with a lower world price.