Scott W. Fausti

Analysis of the efficiency of four marketing methods for slaughter cattle

Four marketing methods for slaughter cattle were analyzed and examined for pricing efficiency. Profits per head were found to be significantly different under the various marketing methods. Greater price discrimination occurred as carcass information increased. Increased price discrimination led to greater dispersion of profit from one marketing method to another. Different marketing methods appeared to send different production signals to producers. The desires of the consumer for less fat and a high-quality product did not appear to be reaching the producers in the form of profit incentives under the most widely used marketing method.

Production Uncertainty and Factor Price Disparity in the Slaughter Cattle Market: Theory and Evidence

A model of a competitive firm facing uncertainty with respect to input quality is applied to the issue of price differentials existing between slaughter cattle marketing alternatives. The marketing alternatives are live weight, dressed weight, and dressed weight and grade. The model demonstrates that price differentials between marketing alternatives are the result of buyer uncertainty over cattle quality. If buyers are assumed risk averse, then the price differential between alternatives increases. These results lead to the proposition of a theory of factor price disparity, and empirical evidence is presented in support of this theory.

Measuring Risk Attitude of Agricultural Producers Using a Mail Survey: How Consistent are the Methods?

A mail survey is used to examine the consistency of alternative risk preference elicitation procedures using five commonly used methods. These elicitation procedures have been used in previous studies to characterise risk preference. Results show little consistency across procedures, supporting strength-of-preference studies. A general recommendation for mail surveys is the development of relatively easy-to-understand risk-preference elicitation procedures that are framed according to the situational construct in question.

Does the producer have an incentive to sell fed cattle on a grid

Barriers to the adoption of grid pricing by fed cattle producers are investigated over a 206-week period (January 1997 to December 2000). The empirical findings document the following potential barriers to adoption: (1) when fed cattle are evaluated on a grid pricing system versus a dressed weight pricing system, a price differential per cwt. and a per-head revenue differential exists over time, (2) the price differential per cwt. is subject to seasonal variation, resulting in variability in the monetary incentive to market-fed cattle on a grid relative to selling cattle at an average price, and (3) the variability in per-head grid revenue is consistently higher than per-head dressed weight revenue variability over time. The marketing implications for fed cattle producers are (1) the incentive to market on a grid versus selling fed cattle dressed weight is lower in the spring relative to the fall; (2) marketing on a grid does reward producers selling high quality steers and the incentive to market higher quality cattle on a grid has been increasing over the 206-week period of the study; (3) grid discounts levied on lower quality cattle have also been increasing over time; (4) selling on a grid results in higher per-head revenue variability relative to selling fed cattle dressed-weight, indicating that while producers are rewarded when selling high quality cattle on a grid relative to selling at an average price, it is also a riskier marketing option relative to average pricing; and (5) the 4-year trend in the price differential per cwt. for above-average cattle has been positive but negative for the below-average quality cattle. This trend indicates that packers are providing monetary incentives and disincentives based on overall cattle quality when fed cattle are sold on a grid relative to purchasing fed cattle at an average price. Corresponding with this shift in the incentive structure of grid pricing, overall carcass quality has improved in the region from which data was collected. However, the empirical evidence supports the conclusion that the barriers to the adoption of grid pricing continue to exist.

Trading biodiversity for pest problems

Decisions that reduce insect diversity and decrease the network strength in insect communities result in higher pest abundance. Recent shifts in agricultural practices have resulted in altered pesticide use patterns, land use intensification, and landscape simplification, all of which threaten biodiversity in and near farms. Pests are major challenges to food security, and responses to pests can represent unintended socioeconomic and environmental costs. Characteristics of the ecological community influence pest populations, but the nature of these interactions remains poorly understood within realistic community complexities and on operating farms. We examine how species diversity and the topology of linkages in species’ abundances affect pest abundance on maize farms across the Northern Great Plains. Our results show that increased species diversity, community evenness, and linkage strength and network centrality within a biological network all correlate with significantly reduced pest populations. This supports the assertion that reduced biological complexity on farms is associated with increased pest populations and provides a further justification for diversification of agroecosystems to improve the profitability, safety, and sustainability of food production systems. Bioinventories as comprehensive as the one conducted here are conspicuously absent for most agroecosystems but provide an important baseline for community and ecosystem ecology and the effects of food production on local biodiversity and ecosystem function. Network analyses of abundance correlations of entire communities (rather than focal interactions, for example, trophic interactions) can reveal key network characteristics, especially the importance and nature of network centrality, which aid in understanding how these communities function.

Spatial and numerical relationships of arthropod communities associated with key pests of maize

Pest management largely focuses on managing individual pest species with little concern for the diverse communities that co‐occur with key pests and potentially shape their population dynamics. During anthesis, we described the foliar arthropod communities on 53 maize farms throughout the region of eastern South Dakota. The resulting communities were examined for trends in local associations in the abundances of taxa with key pests in the system (rootworms [Diabrotica spp.], European corn borers [Ostrinia nubilalis], aphids and Western bean cutworm [Striacosta albicosta]) using regression analyses. Regional spatial clustering in the abundances of key pests with members of the community was explored using Morans I test statistic. The distributions of rootworms and European corn borer were mapped. A total of 37 185 arthropods representing at least 91 taxa were collected in South Dakota maize; there was an average of 5.06 predators and 8.29 herbivores found per plant. Key pests were never found at economically threatening levels (with one exception for Diabrotica). Numerous species were consistently numerically associated with each of the key pests across the farms during anthesis. Occasionally, these pests shared species with which they were locally associated with; for example, coccinellid egg abundances were predictive of the abundances of all key pest species except rootworm adults. Spatial analysis across the region suggested that species co‐occurred with key pests based on local characteristics surrounding the fields, rather than as a result of regional characteristics. Exceptions were documented; namely aphids and Western bean cutworms that spatially clustered with a handful of other members of the community. The results of the study point out that the abundances of key pests of maize were interconnected through indirect associations in the abundances of other members of the community. These associations may be useful for manipulating maize agroecosystems to minimize the effects of maize pests.

Insecticide use and crop selection in regions with high GM adoption rates

South Dakota has been a leading adopter of genetically modified organism (GM) crops since their introduction in 1996. In 2009, South Dakota shared the top adoption rate with Iowa for the percentage of acres planted with Bt corn. However; South Dakota has also recently experienced a significant increase in the proportion of acres treated with insecticide. The empirical evidence presented suggests that corn, hay and sunflower production in South Dakota have experienced an intensification of insecticide use in 2007 relative to past US Census of Agriculture reporting years. This study links the proportion of acres planted for a specific crop to the proportion of total acres treated with insecticide at the county level. This approach provides insight on how changing cropping patterns in South Dakota have influenced insecticide use. Empirical results indicate that the upper-bound estimate for insecticide usage on non-Bt corn acreage increased from 38% in 2002 to all non-Bt corn acres planted in 2007. The implication of this result is that in 2007 South Dakota producers were likely treating a percentage of their Bt corn acres with insecticide. Changing cropping patterns in South Dakota are also compared to that in other states in the US Corn Belt region. It appears that the South Dakota experience is not unique and is part of a broader trend.

The Effect of the Livestock Mandatory Reporting Act on Market Transparency and Grid Price Dispersion

The Livestock Mandatory Reporting Act (MPR) of 1999 was implemented in April 2001. Empirical evidence indicates a significant change in intra-week price dispersion associated with publicly reported fed cattle grid premiums and discounts occurring after MPR implementation. The research objective is to evaluate the effect of increased market transparency resulting from implementation of MPR, on grid intra-week premium and discount dispersion levels. Empirical results suggest that increased transparency is compatible with intra-week dispersion levels increasing. Increased dispersion suggests that during the pre-MPR period weekly premium and discount data may have been drawn from a non-representative sample. From the empirical evidence, it is concluded that reform of the livestock price-reporting system appears to have been necessary in the case of publically reported grid premiums and discounts.

Public Price Reporting in the Cash Market for Live Cattle: A Spatial Market Approach

Legislative authorization for the Livestock Mandatory Reporting Act of 1999 was renewed in October of 2006. One of the cited justifications for implementing mandatory reporting was that the voluntary reporting system for the slaughter cattle cash market was unable to provide accurate and timely market information. We extend the spatial market analysis literature by developing a methodology for detecting distortions in spatial relationships across related price series. Using spatially linked regional markets, we compare state-level mandatory price-reporting data to the U.S. Department of Agriculture voluntarily reported state data to determine if the spatial relationship between price-reporting mechanisms was disrupted by market distortions prior to implementation of federal mandatory price reporting. We found no empirical evidence of system failure; therefore, we conclude that market thinning or noncompetitive behavior had not reached the level necessary to disrupt the ability of the voluntary price-reporting system to provide timely and accurate price information.

Smuggling and parallel markets for exports

This article proposes a model of smuggling consistent with the coexistence of firms involved in strictly legal trade with firms involved in smuggling. A framework is presented in which a firms degree of risk aversion and the level of government enforcement are the determining factors in the decision of the firm to smuggle or not to smuggle. The model demonstrates that smuggling must be welfare enhancing or all smuggling activity will end. This article also provides a theoretical analysis of the effect enforcement has on smuggling and welfare. Increased enforcement is shown to have a negative effect on welfare. Government enforcement is assumed to have two policy instruments it can use to combat smuggling: (1) the probability of detection and (2) the monetary penalty. The relative effectiveness of government enforcement instruments in deterring smuggling is shown to be dependent on the degree of firm risk aversion.