The microeconomics of food security

This article develops a dynamic microeconomic model of food security under uncertainty, with special focus on the relationships between food demand, nutrition and human survival. It investigates the influence of entitlements on malnutrition, hunger and starvation under uncertainty. It develops useful insights on the links between food security and a number of policy instruments commonly used in dealing with malnutrition and starvation.Food Security and Poverty,

A Cost Approach to Economic Analysis under Production Uncertainty

This paper explores the economics of input decision by a firm facing production uncertainty. It relies on a state-contingent approach to production uncertainty. First, the paper develops a methodology to specify and estimate cost-minimizing input decisions under a state-contingent technology. Second, the analysis is applied to time series data on US agriculture. It finds strong empirical evidence that, in the analysis of input choices, expected output alone does not provide an appropriate representation of production uncertainty. The results provide empirical support for an output-cubical technology. This indicates that an ex post analysis of stochastic technology (as commonly found in previous research) appears appropriate. The analysis also provides evidence that the cost of facing adverse weather conditions has declined in US agriculture over the last few decades.production uncertainty, state contingent, cost, cubical technology., Research Methods/ Statistical Methods, C3, D21, D8,

ON THE ECONOMIC RATIONALITY OF MARKET PARTICIPANTS: THE CASE OF EXPECTATIONS IN THE U.S. PORK MARKET

This study investigates the nature of price expectations in a competitive market. The approach is illustrated in an application to the U.S. pork market, which exhibits cyclical patterns and biological production lags. Pork price equations are estimated under different expectation regimes. The empirical results suggest the presence of heterogeneous price expectations among market participants. A large proportion of the market (73%) is found to be associated with backward-looking expectations, where future prices are anticipated on the basis of their observed historical patterns.Agribusiness,

On the Productive Value of Biodiversity

The paper investigates the value of biodiversity as it relates to the productive value of services provided by an ecosystem. It analyzes how the value of an ecosystem can be "greater than the sum of its parts." First, it proposes a general measure of the value of biodiversity. Second, this measure is decomposed into four components, reflecting the role of complementarity, scale, convexity, and catalytic effects. This provides new information on the sources and determinants of biodiversity value. Third, the paper examines the role of uncertainty. In this context, the role of risk and of downside-risk exposure and their effects on the value of biodiversity are explored. This provides useful insights on how management and policy decisions can affect the value of biodiversity.biodiversity, productive value, complementarity, scale, convexity, catalytic effect, uncertainty, Environmental Economics and Policy, D6, Q2, Q5,

A DYNAMIC ANALYSIS OF THE EFFECTS OF A PRICE SUPPORT PROGRAM ON PRICE DYNAMICS AND PRICE VOLATILITY

This study presents an econometric analysis of the effects of a government price support program on price dynamics and price volatility. Price support programs, a common feature of agricultural policy, provide a lower-bound censoring of the distribution of market prices. An econometric model of market prices is developed using a dynamic Tobit specification under time-varying volatility. The model is applied to the U.S. non-fat dry milk market. It is used to investigate the impact of market liberalization on price dynamics and price volatility in the presence of private and public stocks. The econometric results show how the price support program and stocks (both private and public) affect expected price volatility.Agricultural and Food Policy,

Responding to the Coffee Crisis: What Can We Learn from Price Dynamics

We develop a semi-structural price vector autoregression to capture coffee price dynamics over various time horizons. The presence of the International Coffee Agreement is permitted to alter supply responses to price signals through yield and planting effects. In the short run, the ICA caused Brazilian farm prices to become disconnected from international prices. In the long run, the ICA promoted supply response by providing a stable environment in which producers could use current price information to predict future prices. In the intermediate run, it muted supply response by necessitating an institutional price wedge between wholesale and farm level prices. In net, the ICA created a price cycle that does not exist in non-ICA periods. Oxfam's proposal to burn 300 million pounds of coffee will provide temporary relief to farmers, but cannot be used repeatedly as a long term strategy. The low coffee prices experienced since the disintegration of the ICA may be due to the interaction of supply lags, a shift in the composition of coffee demand, and low price response due to price uncertainty. No evidence of asymmetric price transmission is found.

Price Dynamics in a Vertical Sector: The Case of Butter

We develop a reduced-form model of price transmission in a vertical sector, allowing for refined asymetric, contemporaneous and lagged, own and cross price effects. The model is used to analyze wholesale-retail price dynamics in the US butter market. The analysis provides strong evidence of asymmetric price transmissions. It documents the complex nature of nonlinear price dynamics in a vertical sector and its implications for the distribution of future prices. It finds evidence that the asymmetric response to shocks is stronger in the sort run for retail prices, and in the longer run for wholesale prices.

AN ECONOMETRIC ANALYSIS OF THE EFFECTS OF MARKET LIBERALIZATION ON PRICE DYNAMICS AND PRICE VOLATILITY

The paper investigates price dynamics under market liberalization, with a focus on the effects of lowering price floors. We analyze price dynamics by specifying and estimating a dynamic Tobit model under time-varying volatility, where the market price is censored by a government-set support price. The model is applied to the U.S. butter market over the last three decades. The econometric results show how the price support program affects both expected prices and the volatility of prices. It is found that the censoring effects of a price support program can be significant and large even if the price support is set relatively low.Demand and Price Analysis,

AN ANALYSIS OF ECONOMIC EFFICIENCY IN AGRICULTURE: A NONPARAMETRIC APPROACH

A nonparametric analysis of technical, allocative, scale, and scope efficiency of agricultural production is presented based on a sample of Wisconsin farmers. The results indicate the existence of important economies of scale on very small farms, and of some diseconomies of scale for the larger farms. Also, it is found that most farms exhibit substantial economies of scope, but that such economies tend to decline sharply with the size of the enterprises. Finally, the empirical evidence suggests significant linkages between the financial structure of the farms and their economic efficiency.Farm Management, Industrial Organization,

Wal-Mart, Private Labels, and Supermarket Milk Prices

Wal-Mart, private labels, strategic reactions, Agricultural and Food Policy, Demand and Price Analysis,