Peter Helmberger

Wheat Acreage Supply Response under Changing Farm Programs

Planted wheat acreage supply elasticities are estimated for each of several leading wheat-producing states. Estimates of elasticities for the aggregate of these states are 0.77, 0.45, and 0.52 for spring wheat, winter wheat, and all wheat, respectively, but there is considerable heterogeneity among states. Acreage allotments and marketing quotas appear to have destroyed the role of prices in allocating acreage between wheat and other crops during the years 1950 and 1954–64. Estimates were obtained using multiple regression analysis of time-series data for the period 1948–74. This period was subdivided in order to take account of changing farm programs.

Cooperative Enterprise as a Structural Dimension of Farm Markets

This article reports on a theoretical analysis of cooperative marketing under alternative sets of assumptions regarding market structure. For some major results, consider a market where raw material is sold by a perfectly competitive industry to a processing industry. If the processing industry has an atomistic structure and no barriers to entry, cooperative marketing—where some processors are cooperatively organized by raw material producers—may cause departures from perfectly competitive equilibrium in the short run, but not in the long run. Where there is but one processor and blockaded entry, cooperative organization of that firm leads to smaller departures from competitive equilibrium than that associated with pure monopsony under many circumstances. Restricted membership cooperation, however, can give rise to market results that are undesirable from the viewpoint of all except the member producers. If the finished product is sold in perfect competition and scale diseconomies do not exist, cooperative marketing tends to lead to competitive equilibrium regardless of other structural conditions that would support monopsony elements.

A Neoclassical Analysis of the U. S. Farm Sector, 1948–1970

The impacts of major exogenous forces on the farm sector are measured using a seven equation model. Annual estimates of the parameters of an aggregate Cobb-Douglas production function are obtained by using relative market shares. First order conditions for four groups of inputs are derived. Time series and ordinary least squares are used to estimate the supply for farm labor and the demand for farm output. Technological change, exogenous price changes, and population growth are the major exogenous influences. Roughly 90 percent of farm program benefits have accrued to landowners.

Pricing and Storage of Field Crops: A Quarterly Model Applied to Soybeans

This paper considers the role of competitive storage in markets for annually harvested field crops. A quarterly model is presented that considers the allocative role of storage both within and between crop years. Rational price expectations are endogenous variables calculated by a recursive method. Forward stochastic simulations using the model generate data that can be used to characterize the distributions of the variables. In the base case, the model is assigned parameter values from a quarterly econometric model of the U.S. soybean market. The results shed light on the distributions of the quarterly variables, including the rational price expectations, and show how these distributions are affected by changes in the carrying charge.

Future Roles for Agricultural Cooperatives

A T THE winter meetings of this association in 1961, two papers-one by Joseph Knapp and the other by D. B. DeLoach-centered on the future role of cooperation in U.S. agriculture [1, 2]. Little has transpired since then to allow better prediction; and the present paper is a continuation of the previous speculation with, hopefully, a few new ideas for further discussion and research. To some extent, the discussion is relevant to cooperation by nonfarm firms and consumers. Ideally, we would like to know the past, present, and future effectiveness of farmer cooperatives in achieving whatever goals might be prescribed for them, presumably assuring competitive terms of trade in selling and buying. I question neither the value of such information nor the difficulty in securing it. The approach taken in this paper, however, is less demanding in that it backs away from impacts and focuses on (1) the growth and present position of farmer cooperation, and (2) the major factors determining past trends and future prospects. Such appraisal is of value on the assumption that increasing cooperation pushes market performance toward the competitive solution.

Welfare Implications of Commodity Storage under Uncertainty

Intertemporal equilibrium is determined for a competitive market when private inventories are held. Production and storage decisions respond to rational expectations of uncertain prices. Algebraic expressions for gains (losses) to buyers and producers are derived in this context. Competitive equilibrium maximizes gains to society. Government programs that stabilize price either completely or partially generate benefits to producers and losses to buyers relative to competitive equilibrium. Welfare effects are quantified assuming an initial period of abundance and various supply and demand elasticities.

Competitive Pricing and Storage under Uncertainty with an Application to the U.S. Soybean Market

Relative to a no-storage regime, competitive storage of soybeans greatly reduces the variance of both annual prices and annual consumption. Variance of production is increased. Expected values of price, consumption, and production are not affected. The government could reduce price variance by about 70 percent of its competitive level through subsidizing storage activity. The research procedure is based on a model of competitive storage under conditions of uncertainty and assuming rational expectations. Farm-level demand and supply functions are estimated. Simulation is used to generate large random samples of values for soybean prices, consumption, production, and year-end stocks.

Four Approaches to Commodity Market Stabilization: A Comparative Analysis

The effects of four alternative price stabilization programs for soybeans are compared using a rational expectations model and simulation. For a given government expenditure, subsidized private storage is the most efficient way to stabilize market price. For a given deadweight loss, a program of direct payments is the most efficient stabilizer of the effective farm price; this program does not stabilize market price. All four programs, including a buffer stock program and one involving both direct payments and buffer stocks, tend to destabilize quasi-rent. Programs that involve an initial build-up of stocks increase producer benefits and hurt consumers.

Marketing Cooperatives in the U.S.: Membership Policies, Market Power, and Antitrust Policy

This paper explores some of these issues and briefly considers their implications for antitrust policy toward cooperatives. Two central questions are: What is the extent of restricted as opposed to open membership cooperation in the United States? If an observable pattern in membership policies exists among cooperatives, what might explain it? These questions require observation and analysis of numerous market factors, an important one being the extent to which marketing cooperatives have gained market power in their final product markets. The full significance of the empirical findings and their policy implications requires an understanding of certain basic theoretical considerations. Theoretical Considerations Recent advances in theory of cooperation make considerable use of an average revenue product (ARP) function which shows for alternative levels of an input the maximum price which a firm can pay for that input, given that all other costs have been met.1 The corresponding marginal revenue product (MRP) function shows the rate of change in total revenue product associated with various levels of input. That part of the MRP

Rational Expectations and Competitive Pricing and Storage

Should the government of a free enterprise economy such as the United States undertake commodity price stabilization? Economists can surely help to answer this question by measuring the economic effects of whatever stabilization program is under consideration. If benefit and cost measurements can be made, so much the better. Quantitative analysis is needed on the performance of commodity markets over time with and without a stabilization program. At present such analysis is impeded by the absence of a satisfactory intertemporal theory of market storage and pricing under conditions of uncertainty. Literature in the Waugh-Oi tradition, including papers by Massell (1969, 1970), Turnovsky, and Subotnik and Houck, is concerned mainly with the benefits and costs of stabilization in comparison with markets where the role of market storage is ignored. Another line of work, following Gustafson, seeks to determine optimum storage given initial conditions, including carryin from previous periods and demand and supply relationships. Here, too, the role of a market or other allocative mechanism in determining storage levels often is given short shrift. The recent paper by Burt, Koo, and Dudley, for example, estimates optimal strategies for a U.S. wheat reserve policy without modeling private storage decisions and without analyzing interactions between private and public decision makers. While this approach may be useful in identifying inefficiency, it is not clear how, in a market economy, such findings can be used to frame a sensible government program. A third area of relevant literature deals with futures markets. Although this literature is vast and instructive (Gray and Rutledge), the theoretical work is often informal and disjointed. The objective of this paper is to develop a theory of competitive pricing and storage under uncertainty. We believe that the theoretical results have important implications for future empirical research and public policy. This development draws upon the earlier work of Samuelson, Turnovsky, and Helmberger and Weaver. Samuelson developed a theory of storage and temporal pricing assuming that future events were known with certainty. He suggested that his theory might help in understanding real-world phenomena and be a stepping stone to analyses involving uncertainty. When uncertainty is introduced, however, an assumption must be made about how price expectations are formed by market participants. Helmberger and Weaver developed a theory of storage under conditions of uncertainty assuming that producers and arbitragers are guided by rational expectations (Muth). However, the way price expectations are formed within their theory is consistent with rational expectations only under restrictive assumptions, and one purpose of this paper is to relax those assumptions.