William W. Lin

An Empirical Test of Utility vs. Profit Maximization in Agricultural Production

Production economics literature contains many studies which assume that the producers goal is to maximize profits. This study tests the hypothesis that Bernoullian and lexicographic utility are more accurate predictors of farmer behavior than profit maximization. Six large California farms were used to test the hypothesis. After-income tax E-V (expectation-variance) boundaries were developed for each farm and utility, and profit maximizing crop plans were determined for each. A goodness-of-fit criterion showed that Bernoullian utility formulations provided the greatest accuracy in predicting actual and planned crop patterns, followed by the lexicographic formulation. Profit maximization showed the poorest predictive power.

Measuring Aggregate Supply Response under Instability

In spite of the strong interests that agricultural economists have had in measuring aggregate supply response in the past, there are only a few studies that explicitly introduce the risk element into the models (e.g., Behrman, Just, Traill). Behrman quantifies both yield and price variabilities by using three-year moving average standard deviations about a simple moving average of yield and price. Just formulates a risk response model by assuming that decision makers would form their risk expectations by geometrically weighting past observations of risk similar to the way in which price and yield expectations are formed. The risk variable was taken to be the square of the difference between the actual explanatory variable (such as gross return) and the expected values. Each lag variable was then divided into observable and unobservable parts similar to the approach suggested by Klein. Assuming the disturbance term follows a normal distribution, an iterative procedure was undertaken to derive the maximum likelihood estimates of the regression coefficients, given values of the lag parameters and the internally generated risk observations. Results obtained from Justs multivariate adaptive expectations model often indicated risk to be significant in acreage response. Traill uses a polynomial lag to measure onion acreage response at the national level. He utilizes an iterative procedure to first estimate the distributed lag effects of the past price variables, then formulates the risk observations by quantifying the absolute deviations of the actual and expected prices. Expected risk is then specified as a distributed lag function of past observations of risk. He found that a simple two-year moving average standard deviation of past actual prices performs at least equally as well as the iterative procedure.

SEGREGATION OF NON-BIOTECH CORN AND SOYBEANS: WHO BEARS THE COST?

This study focuses on the economics of segregating U.S. non-biotech corn and soybeans for shipments to Japan, the primary export market for U.S. non-biotech grains and oilseeds, as a case study. The purposes of this paper are two-fold: 1) to estimate price premiums that buyers in both the U.S. domestic and Japanese export markets were willing to pay for non-biotech corn and soybeans for the 2000-2002 crops; and 2) to examine who bears the cost of segregation.

Regulation in the U.S. Rice Industry, 1965–89

A partial equilibrium framework is used to estimate the deadweight loss arising from government intervention in the U.S. rice market in order to protect domestic producers. The efficiency of the rice program is compared to other grain programs. Deadweight losses relative to taxpayer and consumer costs from rice programs in recent years were only slightly higher compared to the same measure associated with major commodity programs. The primary source of deadweight losses in rice programs result from set-asides. The potential savings from completely decoupling the rice program are estimated to reach

Effects of Marketing Loans on U.S. Dry Peas and Lentils

387 million for 1987.

Economic Issues In Agricultural Biotechnology

The 2002 Farm Act required USDA to implement marketing loans for the 2002-07 crops of dry peas, lentils, and small chickpeas. This provision led to expanded acreage for dry peas and lentils, crops analyzed in this study. The analysis found that marketing loans played a role in expansion for dry peas in 2003-05 and for lentils in 2003. For dry peas and lentils, marketing loans contributed to acreage expansion in North Dakota and Montana. Simulation model results suggest that marketing loans had negligible impacts on world prices for dry peas and lentils in 2003-05. Impacts on U.S. exports were minor, increasing by about 2 percent in 2003.