James K. Binkley

Optimal Storage and Marketing Over Space and Time

Borrowing from the theory of optimal resource extraction, we develop the mechanism guiding efficient commodity storage and marketing over producing regions through the crop year. Optimal storage occurs at producing areas, and time in storage varies directly with distance to market. Prices grow with interest rates in locations where storage is efficient but more slowly elsewhere, which explains why market prices (i.e., prices at the market) grow more slowly than interest rates. The model is empirically supported by examining storage in the Corn Belt, rates of price growth at various points, and quarterly grain marketings.

Land Price Volatility in a Geographically Dispersed Market

Historical evidence and theory lead to a hypothesis that land price variation increases with distance to market. This hypothesis is tested with county data from five Cornbelt states during the period 1969 to 1987, when price changes were unusually large. Our data support the hypothesis. In the 70s, prices increased more in the Western Cornbelt than in the Eastern Cornbelt; in the 80s, the Western Cornbelt experienced the more precipitous price declines. Our hypothesis explains why Great Plains farmers have experienced greater financial problems during times of stress than have many other farmers.

Grocery market pricing and the new competitive environment

Abstract This article seeks to examine the effect of changes in retail-grocery market conditions upon consumer prices and the response of food retailers to these conditions. We explore these issues for two different product groups. One is composed primarily of branded, dry and frozen groceries (P1) while the second largely represents produce, meat, and perishable products (P2). Our statistical model finds that the effect of these new market conditions is often markedly sensitive to product type. Competitive conditions affect both price measures, but entry by warehouse and similar grocery formats surprisingly lower perishable prices more than those for staple goods. We also observe that frequent price changes in a market serves to reduce food prices, suggesting that promotional activities in response to new format competition are beneficial for consumers. There is strong evidence of a fast food-supermarket rivalry, but we are unable to identify its specific nature. Operating costs significantly effect prices for staple itmes, but have virtually no evident influence on perishable.

CONSUMER PRICE AWARENESS IN FOOD SHOPPING: THE CASE OF QUANTITY SURCHARGES

Abstract Quantity surcharges, higher unit prices on larger sizes than smaller sizes , are often found among grocery items. In this study we consider the question of why consumers buy surcharged goods. We hypothesize that it is the consequence of a failure to price search, and that some buyers purchase larger sizes in the belief they are cheaper, thus avoiding the need for price comparisons. In the analysis we examine canned tuna, using 1990 data from 54 grocery regions on sales, prices, and consumer demographics. Results support the hypothesis. We find evidence that buyers of surcharged items are mainly those with high time and information costs.

Major Determinants of Ocean Freight Rates for Grains: An Econometric Analysis

Econometric analysis of ocean grain rates suggests that ship size and trade volume are of approximately equal importance with distance in determining rates. Use of large ships reduces at-sea costs and hence the role of distance; but larger ships appear to incur higher port costs, which suggests that efficient port facilities are required for scale economies to be realized. Policies to improve shipping technology and increase trade volume can lead to lower rates, reduce geographic differences among exporters, and thus lead to more competitive markets. This implies that the role of transportation in trade analysis should not be ignored.

The Effect of Variable Correlation on the Efficiency of Seemingly Unrelated Regression in a Two-Equation Model

Abstract The efficiency gain of seemingly unrelated regression (SUR) relative to OLS is a decreasing function of correlation of variables across equations. This article examines the efficiency gain for an individual coefficient in a two-equation model. It is seen that the effect of correlation among variables across the equations greatly depends on the multicollinearity already existing within an equation. In particular, the major factor determining the efficiency gain of SUR for the coefficient on an individual variable is not the correlation between that variable and those in the other equation. Rather, it is the correlation between the latter and the residuals obtained by regressing the variable in question on the remaining variables in its own equation.

A Note on the Efficiency of Seemingly Unrelated Regression

Abstract The variance-covariance matrix for the seemingly unrelated regression estimator is expressed as an ordinary-least-squares variance-covariance matrix. This permits new insights into the efficiency of seemingly unrelated regression, especially the role of correlations among variables.

Field time constraints for farm planning models

Abstract Resource limits for weather dependent constraints in farm planning models are often implemented as chance constraints. Procedures for setting right-hand sides for these constraints are often based on rules of thumb which are seldom updated. This paper presents an approach for validating these rules of thumb, and demonstrates the approach for a heavily used farm planning model. An evaluation of the robustness of chance constraints for equipment availability which are dependent on good (sufficiently dry) field time, is presented. Rules for setting constraints affected by good field time were found to be dependent on the tillage system(s) under consideration. These results imply a need for more research on setting availabilities of stochastic resources under alternative tillage systems.

Comparison of grocery purchase patterns of diet soda buyers to those of regular soda buyers

The ultimate effect of regular and diet carbonated soft drinks on energy intakes depends on possible relations with other dietary components. With this motivation, this study compared grocery purchase patterns of regular and diet soft drink consumers using a large sample of US single-person households. We tested for differences in food-spending shares allocated to 43 food categories chosen mainly for their desirable/undesirable nutritional properties. We also investigated whether differences in purchased quantity of diet soft drinks are associated with differences in purchases of other food categories. We found a large number of significant differences, virtually all showing that more diet soda prone consumers make better nutrition choices, particularly regarding energy content. The study suggests that use of diet soft drinks does not lead to compensation by increased use of high-energy foods.

Procompetitive Effects of Foreign Competition on Domestic Markups

A short-run model for estimating the procompetitive effects of foreign competition on markups in an oligopolistic, domestic industry is developed and estimated using data on the Australian automobile industry. Estimates reveal that these effects are rather large and cannot be ignored when predicting the effects of a shock affecting foreign costs. These estimates can also facilitate inferences about the nature of interfirm rivalry. Copyright 2000 by Blackwell Publishing Ltd.