Production Incentives from Static Decoupling: Entry, Exit and Use Exclusion Restrictions

The use of agricultural decoupled support has increased as World Trade Organization (WTO) member nations implement less trade distortive policies. However, the true production effects of these policies are still unclear. We show how the exclusion restrictions of U.S. direct payments, namely, the fruit and vegetable restriction and the requirement of keeping land in good agricultural use, cause the decoupled payment to become fully coupled over time as relative profits adjust. Theoretically, decoupled payments can be more trade distorting than an equivalent (same level of taxpayer expenditure) fully coupled subsidy.decoupled payments, infra-marginal support, cross-subsidization, Agricultural and Food Policy, International Relations/Trade, Land Economics/Use, Q15, Q17, Q18,

Decoupled Direct Payments Under Base Acreage and Yield Updating Uncertainty: An Investigation of Agricultural Chemical Use

Decoupled payments were thought to have minimal impacts on current production decisions and input use. However, the literature has identified several mechanisms through which decoupled payments become coupled. We analyze the effects of uncertainty regarding future policy changes on farm-level production decisions and input use, focusing on farmers’ expectations of base acreage and yield updating. Using farm-level data, we find positive relationships between both decoupled and other government payments and real per acre expenditures on agricultural chemicals. Furthermore, there is evidence that decoupled payments may affect the intensive margin more than other government payments.coupling, decoupled payments, input use, intensive margin, updating, Agricultural and Food Policy, Risk and Uncertainty, Q12, Q18,

Cross-Subsidization and Exit Deterrence due to Infra-Marginal Support: Implications for Agricultural Policy Analysis

Agricultural and Food Policy,

Consumer Financed Export Subsidies and the Agreement on Agriculture

International Relations/Trade,

An Empirical Examination of the Relationship Between Real Options Values and the Rate of Investment

This paper examines the relationship between uncertainty and investment decisions by food and non-food firms. Using hysteresis and the real options paradigm, we review why uncertainty might cause firms to delay investment. In particular, our model looks for a negative relationship between capital invested and uncertainty. In the alternative, if the relationship is positive, this may be consistent with the exercise of growth options or competitive markets. Empirical results are mixed. In one of the four models we present there is clear evidence of hysteresis, that is a negative relationship between year over year investment and uncertainty. The remaining 3 models indicate the opposite, a positive relationship between investment and risk. Although the models differ, the first model is the stronger of the three. Nonetheless, the results are ambiguous. Although we use a large cross sectional, time series panel set of data, we find nothing remarkable about the food industry per se, except that across industries, their level of investment is about in the middle.Financial Economics,

A General Equilibrium Theory of Contracts in Community Supported Agriculture

Community Supported Agriculture (CSA) contracts allow consumers to buy claims on a farm\u27s future production. In turn, the consumer provides working capital to the farm during the growing season. CSA contracts also provide risk management for farmers with limited access to Federal crop insurance by transferring part of the farm\u27s risk to the consumer. We derive a theory of CSA contract pricing for the two most prevalent types of CSA contracts: yield contracts, in which consumers receive a percentage of the farm\u27s production, and weight contracts, in which consumers receive fixed quantities. We develop a two-period model in which expected utility maximizing producers and consumers engage in CSA contracting in the first period based on anticipation of yields and spot prices in the second period. Using the model, we generate several testable hypotheses to be explored in future research. Additionally, we present an overview of the data necessary to test the propositions and potential challenges that might arise in related empirical work

The Pricing of Community Supported Agriculture Shares: Evidence from New England

Purpose: Community Supported Agriculture (CSA) programs allow consumers to buy a share of a farm’s production while providing working capital and risk management benefits for farmers. Several different types of CSA arrangements have emerged in the market with terms varying in the degree to which consumers share in the farm’s risk. No-arbitrage principles of futures and options pricing suggest that CSA shares should be priced to reflect the degree of risk transfer. Methodology: We evaluate the three most common share types using a cross-sectional dataset of 226 CSA farms from New England to determine if there is empirical evidence in support of the theoretical price relationship between share types. Findings: The degree of risk transfer from farmers to consumers has a significant effect on the share price. There are statistically significant returns to scale and higher prices for organics. Farm characteristics and product offerings predict which type of shares is offered for sale. Research limitations: The data set does not contain information pertaining to actual deliveries, expected deliveries, variance of expected deliveries, or covariance information; thus differences in share prices could be due to differences in these uncontrolled factors. Value: This paper provides empirical evidence that CSA share prices reflect the degree of risk transferred from the producer to the consumer. It also highlights challenges in conducting empirical work pertaining to CSA contracting

THE EFFECTS OF TANZANIAN MAIZE EXPORT BANS ON PRODUCERS’ WELFARE AND FOOD SECURITY

The Tanzanian government has banned the exportation of maize on several occasions since the 1980s. The government argues these bans ensure an adequate domestic food supply and help stabilize consumer prices. While low domestic prices benefit urban consumers, the bans negatively affect farmers’ and traders’ incomes by hindering their access to lucrative prices in international markets. Because the bans are often ad hoc and impromptu, the policy causes market uncertainty which may have long-run implications for future food security and trading opportunities. This study uses cross-sectional household data from 244 randomly selected households collected in October and November of 2015 from the Mufindi district of Tanzania, a key maize producing region, to analyze the policy’s effects on agricultural production decisions, farmers’ responses to price risks generated by the export bans, the implications of the bans on long-run food security, and the effects of the bans on engagement in agricultural activities and investment. While none of the respondents indicate that they stopped producing maize because of the bans, 43 percent indicated that they decreased maize production and started growing other crops. Approximately 63 percent of respondents now produce maize only for household consumption. The survey findings indicate maize farmers are affected by export bans through lower prices and unpredictable markets. The bans caused some farmers to incur negative profits while others were unable to pay inputs suppliers. The bans also reduced investment in maize farming businesses. The majority of respondents indicated that they would reduce acreage allocated to maize production but continue producing maize to meet household consumption needs if the bans are reinstated

Constraints to Agricultural Production and Marketing in the Lagging Regions of Bangladesh

This study analyzes the constraints affecting agricultural production in the lagging regions of Bangladesh. These regions are lagging in agricultural productivity due to natural phenomena and past government policies. Ten lagging regions, covering eight administrative divisions, were selected for analysis based on crop productivity indicators, percentage of the population in extreme poverty, and agroecological zones. Data were collected from 1257 farm holders using a structured questionnaire. Respondents were mostly older, illiterate males with low levels of education. Production constraints included inadequate supplies of fertilizer and pesticides in local markets. Labor accounted for the highest proportion of agriculture expenditures (51.3%), followed by equipment rental (11.8%), then pesticides (9.3%), and irrigation (8.2%). Only 35.4% of respondents availed credit to purchase agricultural inputs; among them, 85.4% borrowed from formal sources. Lack of proper irrigation facilities, production machinery, and access to institutional credit, difficulties procuring inputs and storing products, and negative impacts of climate were identified as the major constraints to agricultural productivity and marketing in the lagging regions. Access to credit and being adversely affected by weather impacted respondents’ agricultural productivity more than sociodemographic factors