Leigh J. Maynard

Functional Foods as a Value-Added Strategy: The Commercial Potential of “Cancer-Fighting” Dairy Products

Levels of conjugated linoleic acid, which may help prevent cancer, can be elevated in milk. A sensory evaluation, willingness-to-pay survey, and feasibility analysis suggest that profit potential exists for producers serving niche markets via small-scale processing ventures. Households with children and health-conscious consumers appear most willing to pay premiums for “cancer-fighting” dairy products. Consumer demand and the legality of health claims hinge on pending medical research outcomes. Copyright 2003, Oxford University Press.

IMPACT OF RISK PREFERENCES ON CROP ROTATION CHOICE

Stochastic dominance analysis of five crop rotations using twenty-one years of experimental yield data returned results consistent with Pennsylvania cropping practices. The analysis incorporated yield risk, output price risk, and rotational yield effects. A rotation of two years corn and three years alfalfa hay dominated for approximately risk neutral and risk averse preferences, as did participation in government programs under the 1990 Farm Bill. Crop rotation selection appeared to impact net revenues more than the decision to participate in government programs.

Price Sensitivities for U.S. Frozen Dairy Products

Price elasticities and flexibilities for frozen dessert products were estimated from weekly scanner data, with emphasis on functional form selection, system misspecification testing, and endogeneity testing. Reciprocals of elasticities and elasticity matrix inversion were invalid means of obtaining flexibility estimates, leaving direct estimation as the only viable, albeit resource-intensive, approach.

Performance of shrimp futures markets as price discovery and hedging mechanisms

Abstract Granger causality tests revealed leading indicators of shrimp futures prices, implying that futures prices do not reflect all available market information and potentially fail to be an exemplary price discovery mechanism. Trading simulations confirmed that the use of some leading indicators allowed profitable arbitrage in shrimp futures trading. Shrimp futures were deficient as a hedging tool, as well. Correlations between futures and wholesale cash prices were often low, and basis risk rivaled price risk. Lack of liquidity is a likely explanation for shrimp futures’ shortcomings as a hedging tool and price discovery mechanism.

PRICE DISCOVERY IN THE EGG INDUSTRY

Formula pricing of eggs is typically based on quotations issued by Urner Barry Publications, and egg producers worry that the quotes are systematically lower than equilibrium levels. Egg Clearinghouse, Inc. (ECI) provides a public forum for cash trading, intended to facilitate price discovery. Evidence from 1994-95 does not suggest that Urner Barry understands producer level prices on average, Granger causality tests indicate a feedback relationship between the Urner Barry quotes and ECI prices, with ECI leading during price upswings. Lead times appear to have fallen since the late 1970s and early 1980s, confirming earlier predictions regarding market efficiency.

Livestock Gross Margin-Dairy Insurance: An Assessment of Risk Management and Potential Supply Impacts

Public risk management policies for dairy producers have the potential to induce expansion in milk supplies, which might lower farm-level prices and offset risk-reduction benefits. An evaluation of USDA’s Livestock Gross Margin-Dairy (LGM-Dairy) insurance program finds economic downside risk significantly reduced, with potential to induce modest supply expansion (0 to 3 percent) if widely adopted. Supply impacts are likely limited due to relatively low participation levels and a minimal (“inelastic”) supply response to risk. LGM-Dairy is more flexible and convenient than other risk management tools, such as hedging directly in futures or options markets, especially for small farms.

Livestock Gross Margin-Dairy: An Assessment of Its Effectiveness as a Risk Management Tool and Its Potential to Induce Supply Expansion

An evaluation of the risk-reducing effectiveness of the Livestock Gross Margin–Dairy (LGM-Dairy) insurance program, using historical futures price data, predicts economically significant reductions in downside margin risk (24–41%) across multiple regions. Supply analysis based on the estimated risk reduction shows a small supply response, assuming minimal subsidization. A decomposition of the simulated indemnities into milk price and feed price components shows comovements in futures prices moderating the frequency and levels of indemnities.

Using Linked Household-Level Data Sets to Explain Consumer Response to Bovine Spongiform Encepalopathy (BSE) in Canada

Household-level Canadian meat purchases from 2002 to 2008 and a Food Opinions Survey conducted in 2008 were used to explore consumer responses to bovine spongiform encephalopathy (BSE) at the national level in Canada. Consumption in terms of the number of unit purchases was analyzed with a random-effects negative binomial model. In this study, household heterogeneity in meat purchases was partially explained using data from a self-reported food opinions survey. Of special interest was the hypothesis that consumers responded consistently to BSE in a one-time survey and in actual meat purchase behavior spanning years. Regional differences appeared, with consumers in eastern Canada reacting most negatively to BSE. Consumers responded more to the perception that food decision makers are honest about food safety than to the perception that they are knowledgeable, in maintaining beef purchases during BSE events.

Consumer-Level Determinants of Wine Purchases in Canadian Restaurants

Logistic regressions identified determinants of red and white wine purchases in formal and casual restaurants, using a detailed dataset of over 26,000 consumer-level food away-from-home purchases in two Canadian provinces during 2000–2005. Meal context regressors, and prior behavior associated mainly with unobserved heterogeneity, contributed most of the explanatory power, with observable demographic regressors playing a modest role. The main strategic recommendation is thus to focus wine marketing resources on the restaurant environment, with less emphasis on targeting specific audiences. (JEL Classification: C25, D12)

Changing market dynamics and value-added premiums in southeastern feeder cattle markets

ABSTRACT The southeast region from Kentucky and Virginia south to Florida is home to more than 5 million beef cows, representing a significant source of farm income. Because very little feedlot capacity exists in the region, feeder cattle sales represent the majority of beef cattle receipts. This work examined numerous factors that affect feeder cattle prices including the effect of changes in corn price, the dynamics of BW uncertainty in video auctions, and price premiums associated with age and source verification and cattle selling certified natural. Sale data from Internet sales and preconditioned feeder cattle sales were made available by a large cattle marketing firm in the region from 2008 to 2011. A hedonic model was used to examine the effect of cattle characteristics and market factors on the selling price of feeder cattle. Evidence was found that corn price negatively affected feeder cattle prices, but the magnitude was found to be smaller than in previous research. Premiums for age and source verification were found to be moderate at