James Rude

Developing Policy Relevant Agrifood Models

The opportunities and challenges of incorporating accurate policy representations into institutional partial equilibrium commodity models were investigated. Six issues are raised: commodity space definition, vertical linkages, assessing market power, the changing nature of government support, trade policy, and data requirements. The importance of product attributes and different approaches to modeling product differentiation are considered. A case study of food safety is used to bring together the major issues. Although institutional commodity models still have a role to play, we advocate the use of smaller idiosyncratic models to address many of the relevant policy questions in a rapidly changing sector.

A generalized double-hurdle model of Swedish gambling expenditures

This article estimates the relationship between demand for Swedish gambling, income and the other socioeconomic variables using empirical models of participation and gambling expenditure. It also indirectly attempts to account for the effect of a recent recession on gambling behaviour by examining gambling behaviour when the economy was growing versus the period immediately after a major recession. The aim of the article is to analyse the factors influencing gambling decisions. This is done using the double-hurdle method adjusted for the problems of heteroscedasticity and nonnormality using an approach that can handle extreme values and address skewness. The empirical results ruled out Tobit-type models and normally distributed double-hurdle models. The pattern on income elasticities across income classes implies that implicit Swedish gaming taxes are regressive. Income elasticities become smaller after the recession and the decision to participate changed with respect to the several of the demographic variables.

Trans-Pacific Partnership: Implications for the Canadian Industrial Dairy Sector

L’annonce, en juin 2012, de la participation du Canada au Partenariat transpacifique a entraîné des spéculations sur les graves conséquences de cette décision pour le secteur des produits laitiers avec une possible disparition de la gestion de l’offre. Dans cet article, nous examinons ces questions dans le contexte d’une libéralisation tarifaire et d’un marché canadien assujetti à des prix volatiles. Nous analysons les implications sur la situation des exploitants de ferme laitière, sur la valeur des quotas et sur la situation d’autres agents économiques. Étant donné que le secteur des produits laitiers aux États-Unis a ses propres raisons de se protéger, il est peu probable qu’une importante libéralisation tarifaire soit appliquée. Avec de faibles réductions de tarifs, l’impact sur la valeur des quotas serait minime. De même, les conséquences sur la situation de l’ensemble des exploitants de ferme laitière seraient peu importantes. La gestion de l’offre, en tant que mécanisme bien établi de commercialisation, devrait donc survivre au Partenariat transpacifique, mais les organismes responsables de la mise en marché devront alors possiblement modifier leurs politiques de fixation des prix pour s’adapter aux réductions de tarifs.

Extreme dependence in price transmission analysis

ABSTRACT We propose a generalized procedure that combines conventional price transmission analysis with copula-based dynamic tail dependence, to examine price relationships under extreme conditions. This approach is used to examine Ukrainian wheat markets where export restrictions combined with price surges, 2006–2008 and 2010–2012, have contributed to a turbulent market. The results indicate that domestic prices were effectively insulated from world price shocks, but that a ‘rocket and feathers’ price relation held between domestic flour and wheat prices. These asymmetric price co-movements changed with the degree of restrictiveness of the export prohibitions.

An Analysis of a Rules-based Approach to Disciplining Export Credits in Agriculture

ABSTRACT This paper examines the comparative static effects of rules-based disciplines for government supported export credit arrangements. The arrangements provide traders in the country offering the guarantees more favourable borrowing conditions. This may provide an advantage relative to rival exporters since the supported trader may offer better financial terms to importers. Rules that discipline implicit interest rate subsidies are appropriate when an importing country does not face liquidity constraints when borrowing. However, these rules may not be appropriate with liquidity constraints because of the potential for additionality and benefits for all exporting countries. Rules on benchmarks for insurance premiums are always appropriate because insurance subsidies unambiguously have the potential to distort markets.

Some Unintended Consequences of TRQ Liberalization

This paper analyzes the impacts of trade liberalization in a non-integrated industry where a marketing agency controls the supply of a necessary input in the production of a processed commodity. Trade of the processed good is restricted through a Tariff-Rate Quota (TRQ) and domestic processors operate in an imperfectly competitive industry. Under a fixed proportions technology, an increase in the minimum access commitment of the TRQ will generally lower the domestic retail price to consumers if the marketing agency is a profit-maximizing monopolist. Conversely, if the marketing agency pursues some specific non-economic objectives, it is shown that increases in the minimum access commitment holding the tariff rates constant can lead to higher retail prices and thus negate the benefits of trade liberalization for consumers.

Evaluating Alberta cattle feeders’ loan guarantee program

Purpose - – The purpose of this paper is to evaluate Alberta’s cattle loan guarantee program. It measures the risk premiums on lending that would accrue to banks participating in the program, estimates the value (price) of the loan guarantee, and estimates the interest subsidy provided by the program. Design/methodology/approach - – A cash flow model of cattle feeding is used. The model estimates a measure of risk that is applied to option pricing models to estimate the value of the guarantee. Findings - – Insurance premiums for the credit risk to lenders are 0.20 percent of the value of the loan for the entire feeding period, and 0.41 percent for backgrounding but negligible for finishing. The price of the loan guarantee estimated by the Black-Scholes model is 4.43 percent of the value of the loan and is comparable to prices estimated by the binomial model. The program provides a subsidy rate of 4.58 percent. Research limitations/implications - – Charging a guarantee fee can potentially eliminate the interest subsidy inherent in the program. But this would necessitate determining the impact of the guarantee fee on the additional access to credit that has been achieved through the program. Practical implications - – Different levels of risk for backgrounding and finishing imply different risk premiums on cattle loans. Therefore interest on cattle loans should reflect not only the individual farmer’s risk profile but also the nature of the feeding operation. Originality/value - – This is the first paper to simultaneously estimate risk premiums on cattle feeding loans, the value of the loan guarantee provided by the Alberta Feeder Association Loan Guarantee Program, and the inherent interest subsidy.