Keith Collins

The Elasticity of Foreign Demand for U.S. Agricultural Products: The Importance of the Price Transmission Elasticity

Johnson and Tweeten (1967, 1977) have provided estimates of the elasticity of export demand for specific agricultural commodities and aggregate agricultural exports. These estimates indicate the aggregate export demand for U.S. agricultural commodities is very elastic with respect to price, and the estimated elasticity is somewhat greater than 6.0 in both cases. The elasticities of export demand for specific commodities are also very large, ranging from -2.8 for soybeans to 10.18 for feed grains (Johnson). Theoretically, the elasticity of export demand may be quite large. However, the Johnson-Tweeten estimates do not consider government policies which insulate domestic producers and consumers from external price fluctuations. In order to study the effect of these policies on the elasticity of export demand, we (a) examine the formulation of the elasticity of export demand and the implication of price insulation policies, (b) review the trade policies of major importers and competing exporters, and (c) calculate the export demand elasticities for major agricultural commodities which incorporate price insulation policies. These export demand elasticities are much smaller than those of Johnson and

Multiple Exchange Rate Changes and U.S. Agricultural Commodity Prices

A model was developed to assess recent effects of exchange rate changes, inflation, and price insulation policies on real U.S. commodity prices. Exchange rate effects are defined so that they can occur and be significant under either fixed or floating rate regimes. The results indicate exchange rate effects on real U.S. commodity prices are smallest under free trade and real commodity price insulation policies but rise substantially as nominal price insulation policies become more prevalent.

Designing farm supplemental revenue coverage options on top of crop insurance coverage

Purpose - – The purpose of this paper is to use simulation analysis to assess farmer choice between crop insurance and supplemental revenue options as proposed during development of the Agricultural Act of 2014. Design/methodology/approach - – The certainty equivalent of wealth is used to rank farm choices and assess the effects of supplemental revenue options on the crop insurance plan and coverage level chosen by the producer under a range of farm attributes. The risk-reducing effectiveness of the select programs is also examined through their impact on the farm revenue distribution. The dependence structure of yield and prices is modeled by applying copula techniques on historical data. Findings - – Farm program supplemental revenue programs generally have no effect on crop insurance choices. Crop insurance supplemental revenue programs typically reduce crop insurance coverage at high coverage levels. An individual plan of crop insurance combined with a supplemental revenue insurance plan may substitute for incumbent area crop insurance plans. Originality/value - – The analysis provides insights into farmers’ possible choices by focussing on alternative crops and farm attributes and extensive scenarios, using current data, crop insurance plans and programs contained in the 2014 Farm Bill and related bills. The results should be of value to policy officials and producers in regards to the design and use of risk management tools.

Public policy and the supply of food

Abstract Current policies and programs affecting the supply of food are examined and options assessed for changes that would help generate a food supply consistent with the US population eating according to the Dietary Guidelines for Americans. Potential policy and program changes are identified in three categories: eliminating existing domestic farm and trade program limitations on the US food supply; creating incentives or disincentives, such as taxes or subsidies, to produce foods consistent with the Dietary Guidelines; and influencing consumers directly to choose foods consistent with the Dietary Guidelines. Despite the trend toward liberalization, there remain a few changes in farm and trade policy that would increase consumption of under-consumed foods. Taxes and subsidies are difficult to apply without creating unintended adverse consequences, although removal of production input constraints may be effective. Strategies to influence consumer behavior have advantages over policies designed to affect supplies of foods. Rather than large program interventions, changes in consumer tastes and preferences would drive market forces to efficiently produce the needed food supply.

Optimal Coverage Level Choice with Individual and Area Insurance Plans

We theoretically a farmers optimal use of area and individual crop insurance when area and individual losses are positively but imperfectly correlated. If premium rates for both plans are actuarially fair, the farmer will demand full individual insurance and no area insurance. If area insurance is free and individual insurance is offered at an actuarially fair rate, area insurance replaces a portion of individual insurance demand. If individual insurance is offered as a wrap around the area plan at an actuarially fair rate and area insurance is free, the farmer will demand excess individual insurance and some area insurance. Copyright 2012, Oxford University Press.