AN ECONOMIC ANALYSIS OF PRODUCTIVE EFFICIENCY IN ALBERTA DAIRY PRODUCTION

The World Trade Organization is currently formulating an agenda for a new round of global trade negotiations. Therefore, the likelihood of increased competition within Canada's supply managed dairy industry is probable. Consequently, there is agreater need for producers to be concerned with efficiency and with their competitiveness in the international marketplace. This study assessed the cost efficiency and competitiveness of Alberta dairy producers by estimating the economic costs associated with milk production, and deriving the physical and economic efficiency of producers. Results support the presence of economies of size and economies of yield within Alberta milk production. A link between increased herd size, labour productivity, and lower total labour costs was identified in the analysis.Productivity Analysis,

Evaluating Alternative Safety Net Programs in Alberta: A Firm-level Simulation Analysis

This paper examines alternative risk management strategies in terms of their effectiveness for three representative Alberta farm operations. Stochastic dynamic simulation methods are used to model financial performance for these farms, and alternative risk management programs are compared in terms of their ability to stabilize returns, support income and reduce the probability of bankruptcy. The results suggest that government programs such as the Net Income Stabilization Account (NISA) program or the Farm Income Disaster Program (FIDP) in Alberta have some benefits in terms of supporting income levels and reducing the chances of farm failure. Neither program is very effective, however, in stabilizing year to year income or cash flow for the farm operations. As a risk management program, FIDP is more effective than NISA but this improved performance comes at the price of higher government costs. Performance of NISA and FIDP, relative to alternative risk management programs and strategies such as forward contracting or crop insurance, is mixed. In some cases, NISA does not seem to provide benefits beyond those available from other strategies, while FIDP tends to perform better than the alternatives. Finally, while increased debt load weakens firm financial performance, NISA and FIDP still provide some benefits in terms of supporting income and reducing the probability of bankruptcy.Farm Management, Risk and Uncertainty,

Who Chooses Defined Contribution Plans?

This paper provides new evidence on what types of individuals are most likely to choose a defined contribution (DC) plan over a defined benefit (DB) plan. Making use of administrative data from the State Universities Retirement System (SURS) of Illinois, we study the decisions of nearly 50,000 new employees who make a one-time, irrevocable choice between a traditional DB plan, a portable DB plan, and an entirely self-managed DC plan. Because the SURS-covered earnings of these employees are not covered under the Social Security system, their choices provides insight into the DB vs. DC preferences of individuals with regard to a primary source of their retirement income. We find that a majority of participants fail to make an active decision and are thus defaulted into the traditional DB plan after 6 months. We also find that those individuals who are most likely to be financially sophisticated are most likely to choose the self-managed DC plan, despite the fact that, given plan parameters, the DC plan is inferior to the portable DB plan under reasonable assumptions about future financial market returns. We discuss both rational and behavioral reasons that might explain this finding.

Economic Performance in Alberta Dairy: An Application of the Mimic Model

Dairy production at the farm-level is undergoing a rapid transformation in preparation for more open competition in the future. However, the means by which dairy farms can best improve their economic performance is of some question. Using measures of allocative, technical, and overall efficiency as indicators of a latent "performance" variable, this study specifies and estimates a multiple-indicator, multiple-cause (MIMIC) model of Alberta dairy production. Variables thought to "cause" performance include herd size, milk yield, breeding and veterinary expense, capital-to-labour ratio, concentrate-to-forage ratio, and operator experience. The results show that gains in performance may be made through increased capital intensity, greater spending on breeding and herd health, and, albeit marginally, through increased milk yields. Despite current trends toward larger dairy herds, this may not be a fruitful avenue for future improvements in dairy efficiency.Livestock Production/Industries,

Cost and Efficiency in Alberta Dairy Production

This study investigates the relationships between farm size, milk yield, cost of production, and technical efficiency in the Alberta dairy industry. Estimates of a stochastic production frontier are obtained with two alternative methods; an iterative "average frontier: (AF) procedure and a maximum-likelihood composed error (CE) term method. An index of technical efficiency is calculated for every herd in the sample, with the AF method resulting in an average efficiency ratio of 85 percent, and the CE method producing an average efficiency ratio of 83 percent. Regressions of production cost on milk output, herd size, and efficiency are used to test for the effects of size economies, yield economies, and technical efficiency on production cost. These results suggest that herd expansion, on average, would lower the average cost of production throughout the province. Romain and Lambert use a similar method in a study of Quebec and Ontario dairy farmers which shows a limited potential to exploit economies of herd size. While not a formal test of the similarity of the two industries, the results of this study indicate a significant difference between the optimal structure of dairy production in Alberta and Quebec. Such regional differences will have important implications for the possible reapportionment of the national milk market, whether by regulatory or free-market mechanisms.Livestock Production/Industries,

Is a Bird in Hand Worth More than a Bird in the Bush? Intergenerational Transfers and Savings Behavior

This paper provides new evidence on the decomposition of aggregate household wealth into life-cycle and transfer wealth. Using the 1998 Survey of Consumer Finances, it finds that transfer wealth accounts for approximately one-fifth to one-quarter of aggregate wealth, suggesting a larger role for life-cycle savings than some previous estimates. Despite the smaller aggregate size of transfer wealth, its concentration among a small number of households suggests that it can still have an important effect on the savings decisions of recipients. Estimates suggest that past receipts of transfer wealth reduce life-cycle savings by as much as dollar-for-dollar, while expected future transfers do not produce such a crowd-out effect.

Ecological Goods and Services Survey Summary Prepared for: Lower Souris Watershed Committee

An interview based survey of farm landowners in the south east corner of Saskatchewan was undertaken to evaluate the provision of wildlife habitat by agriculture. Producers were asked to provide management information regarding a piece of their land that was managed as a unit. Within the past ten years there has been a reduction in the conversion of remaining native land to crop land, an increase in conversion of annual crop land to perennial cover crops, an increase in the use of minimum disturbance (no-till) farming, and a decrease in the use of fire on stubble fields and sloughs. Many producers in the area often stated economic reasons for their current land use division. Even ecological reasons (productive capacity of the soil, poor cropping soil, light soil etc.) often had an economic basis. If the land was not productive enough, a management scheme with lower input costs would be adopted. This was commonly demonstrated in this survey by the conversion of marginal land to tame forages. Producers within this region seem willing to adopt farming practices that connect economic sustainability with environmental responsibility. This survey is part of an-on going study of the region.Land Use, Tillage, Crop Production/Industries, Environmental Economics and Policy, Land Economics/Use, Q150, Q240,

An Historical Overview of Crop Acres in Western Canada: A Graphical and Statistical Approach

Crop Production/Industries, Land Economics/Use,

Case Study: Value Added in the Oats Industry in Alberta and Western Canada 1998

Crop Production/Industries,

Statistical Overview of Field Crop Acres, Yields, and Prices in Western Canada

Crop Production/Industries, Production Economics,