Jeffrey C. Williams

The Economic Role of Commodity Storage

One of the earliest, and most successful, exainples of economic policy is the oftquoted Biblical account of Josephs interpretation of the Pharoahs dream. Joseph foretold that seven years of abundant harvests would precede seven years of drought, and recommended that the Pharoah accumulate grain during the good years. Since that time the central role of storage in stabilising the economy in the face of exogenous disturbances has been obvious, but our understanding of the nature of that role has not greatly advanced. Without divine assistance in forecasting stochastic production, the storage decision is considerably more complex than the one Joseph faced, and the role of storage quite different. In fact, several commonly held impressions about the role of storage of commodities such as grains are incorrect. Rather than stabilising production, storage actually accentuates its variability. Rather than causing a mean-price-preserving decrease or a mean-output-preserving decrease in the dispersion of price, storage generally causes a more complex modification of the distribution of price. Rather than being most effective at eliminating short-falls in consumption, storage actually is more effective at eliminating the incidence of exceedingly high consumption. In this paper we explore the role of storage in a model where production is stochastic and both production and storage are performed by competitive profitmaximisers who form rational expectations about the returns to their activities. We derive the subtle but very important interactions among production, price expectations, and storage, which simpler models cannot capture. Finally, we make a comparative statics assessment of the distributional implications of storage. These results, while confirming the importance of the specification of the demand function and the supply elasticity identified in recent analytical studies (e.g. Wright (I979) and Newbery and Stiglitz (I979)), are surprisingly favourable to consumers, considering the asymmetric nature of the effects of storage on consumption and price. Storage is simply a productive activity, one that transfers a commodity from one period to the next. Like other forms of production, it is costly. The total cost of storing an amount St from period t to period t + i is as of period t + i

Spotted wing drosophila infestation of California strawberries and raspberries: economic analysis of potential revenue losses and control costs

BACKGROUND Economic costs of spotted wing drosophila (SWD) include yield and associated revenue losses, labor and material costs for monitoring and management and revenue losses due to the closure of export markets should fruit from SWD-infested regions be banned by trading partners. This analysis focuses on two types of loss in the California raspberry and strawberry industries: yield losses in the absence of management, and insecticide material costs on a per treatment basis. It computes the cost of a specific management program for raspberries in Californias Central Coast region. RESULTS Insecticide material and application costs per treatment and the cost of the management program are small relative to the yield losses in the absence of management that are observed by growers, researchers and others in initial infestations. CONCLUSION It is difficult to evaluate precisely the share of pest management program costs due to SWD because insecticides are sometimes used to manage multiple pests, and because labor-intensive field sanitation efforts to control SWD are recommended practices already. Given these considerations, this analysis finds that the benefits to SWD management well outweigh the costs examined here. Evaluating the efficacy of managing SWD is essential in assessing the risks that SWD poses and the benefits of pest management programs.

The Welfare Effects of the Introduction of Storage

This paper examines the welfare effects of introducing storage into a market with stochastic supply in which all agents are competitive profit-maximizers with rational expectations. These welfare effects are the net result of the initial increase in demand for stock-building and the partial and asymmetric reduction in the dispersion of consumption brought about by storage. The distributional impacts depend crucially on the information available to producers before storage is introduced, the elasticity of supply, the specification of the consumption demand curve, and the cost of storage.

Convenience Yield Without the Convenience: A Spatial–Temporal Interpretation of Storage Under Backwardation

A mathematical programming model of the wheat marketing system of Western Australia manifests a typical pattern of regionwide stocks held at a negative intertemporal spread measured at the port. No stocks are held at a monetary loss in terms of local prices. Any apparent loss is an illusion from spatial aggregation of stocks and attribution of incentives at one locality to storers at all locations. Moreover, as the premium for immediate delivery at the port rises, stocks increase at relatively inaccessible, inconvenient locations where prices are low, allowing more to be shipped from locations more convenient to the port.

The Roles of Public and Private Storage in Managing Oil Import Disruptions

A government storing oil to reduce vulnerability to interruption in foreign supply should recognize the existence of private storage. In fact, public intervention is justified only if some distortion exists in the private market. A price ceiling that the government is unable to eliminate as a possible future policy is such a distortion. We show that public storage can indeed substantially alleviate a price ceilings adverse effects. Appropriate public storage behavior depends importantly on tariff policy and other policy constraints as well as on private sector responses to current and anticipated public behavior.

The Influence of Markets and Policy on Spatial Patterns of Non-Timber Forest Product Extraction

When villagers extract resources, such as fuelwood, fodder, or medicinal plants from forests, their decisions over where and how much to extract are influenced by market conditions, their particular opportunity costs of time, minimum consumption needs, and access to markets. This paper develops an optimization model of villagers’ extraction behavior that clarifies how, and under what conditions, policies that create incentives such as improved returns to extraction in a buffer zone might be used instead of adversarial enforcement efforts to protect a forest’s pristine “inner core.” (JEL Q23)

Soil Fertility Management on Small Farms in Africa: Evidence From Nakuru District, Kenya

Abstract This paper uses data from a 1998 survey of farming households in Nakuru District, Kenya to explore factors influencing soil fertility management decisions of smallholder farmers in Africa. The modeling strategy builds on results of research in soil science that point to the joint determination of inorganic and organic soil nutrient stocks and flows on-farm. Farmers’ decisions on levels of inorganic and organic fertilizer use are hypothesized to be similarly mutually dependent, and to be further influenced by various farmer-specific socioeconomic factors. Econometric estimations indicate that once the effects of cropping patterns, farm-to-market transport costs, and labor availability are taken into account, smallholder applications of inorganic and organic fertilizers appear to be substitutes. Implications for research and policy are drawn.

Measurement of Consumer Gains from Market Stabilization

For most cases of practical significance in which partial equilibrium analysis is appropriate, there is little difference between exact measures of consumer gains from market stabilization and approximations such as expected change in marshallian or hicksian consumer surplus. Careful specification of the nature of stabilization is more crucial than the choice of welfare measure. It is important to represent correctly the demand curvature and supply response and to determine whether general equilibrium responses can be ignored. In any event, an improved analytical approximation and a simple numerical method for calculating the exact measures make it unnecessary to rely on suspect measures.

Sizing Reserves within a Landscape: The Roles of Villagers’ Reactions and the Ecological-Socioeconomic Setting

Traditionally, siting and sizing decisions for parks and reserves reflected ecological characteristics but typically failed to consider ecological costs created from displaced resource collection, welfare costs on nearby rural people, and enforcement costs. Using a spatial game-theoretic model that incorporates the interaction of socioeconomic and ecological settings, we show how incorporating more recent mandates that include rural welfare and surrounding landscapes can result in very different optimal sizing decisions. The model informs our discussion of recent forest management in Tanzania, reserve sizing and siting decisions, estimating reserve effectiveness, and determining patterns of avoided forest degradation in Reduced Emissions from Deforestation and Forest Degradation programs. (JEL Q23)

The Incidence of Market-Stabilising Price Support Schemes

The introduction of a stabilization scheme can raise or lower the wealth of initial owners of land and commodity stocks substantially, even if the are risk neutral. The incidence consists of the capitaliz ed value of the revenue changes along the path to the new stochastic steady state. By ignoring the dynamic path, traditional comparative statics understates the benefits to initial asset holders. Because of differences in dynamic paths, destruction of the commodity can have a lower marginal deadweight loss than a public bu ffer stock, and deficiency payments can be especially attractive when the variability is exogenous to the domestic market. Copyright 1988 by Royal Economic Society.