An Examination of the Market Structure of the U.S. Produce Industry

Recent literature, largely from the U.S. Department of Agriculture, Economic Research Service, indicates that substantial changes have occurred in the produce industry in recent years. With the rise of retail mass merchandisers and increased concentration in the retail food industry, the procurement power of these large firms reportedly has also increased. With direct buying and contracting, market intermediaries such as brokers and wholesalers allegedly are being bypassed. As a result, these market intermediaries ostensibly are also consolidating becoming fewer and larger with increased emphasis on servicing the food service industry. However, the findings of this study indicate that there is no convincing evidence that the market structure of the U.S. produce industry has markedly changed since the early 1980s. While supermarket concentration has increased noticeably, the same cannot be said for produce market intermediaries such as brokers and wholesalers.Agribusiness, Industrial Organization, Marketing,

Securitizing peanut production risk with catastrophe (CAT) bonds

A catastrophe (CAT) bond is designed for peanut production as a means of transferring natural disaster risks from insurance purveyors to the global capital market. The CAT bond so designed is priced using state-level historical yields for peanut production in the southern part of the United States in the State of Georgia. The index triggering the CAT bond contract was based on percent deviation from state average yield. The principal finding of the study is that it appears feasible for crop insurance purveyors to issue insurance-linked securities. CAT bonds can reduce the variance of the loss ratio when issued optimally with regard to the number of bonds and contract specifications. CAT bonds could therefore be used in hedging catastrophic risk effectively in peanut production given that crop insurance purveyors normally seek to minimize the variance of the loss ratio. CAT bonds were found to be feasible as hedging instruments even in the range of normal losses commonly covered by crop insurance and reinsurance.Insurance, Reinsurance, Pricing, Hedging, Agricultural Finance, Crop Production/Industries, Risk and Uncertainty,

BOOK REVIEW: F. Bailey Norwood and Jayson L. Lusk. Agricultural Marketing and Price Analysis. Upper Saddle River, NJ: Pearson Prentice Hall, 2008, xi + 445pp., $86.67 hardback. ISBN 978-0-13-221121-5.

Agribusiness,

The last of the American ag economists

It has become more and more difficult to recruit prospective American Ph.D. students in Agricultural and Applied Economics. The purpose of this study was to determine the extent of the problem, to ascertain why with respect to location and other important factors, and hopefully deduce recruiting solutions. Results indicate that the paramount factors in a profile of those willing to pay the price in terms of sacrifice and effort to obtain a Ph.D. encompass willingness to accept a relatively low starting salary with a Ph.D., likely to be a Foreign National, prone to be in a Midwestern university, and willing to relocate globally. Generally, the Ph.D. starting salary would have to increase dramatically to change the minds of graduate students not intending to pursue a Ph.D. including most American graduate students. A change in public policy appears to be the only real solution.Agribusiness, Agricultural and Food Policy, Agricultural Finance, Teaching/Communication/Extension/Profession,

The Last of the American Ag Economists

It has become more and more difficult to recruit prospective American Ph.D. students in Agricultural and Applied Economics. The purpose of this study was to determine the extent of the problem, to ascertain why with respect to location and other important factors, and hopefully deduce recruiting solutions. Results indicate that the paramount factors in a profile of those willing to pay the price in terms of sacrifice and effort to obtain a Ph.D. encompass willingness to accept a relatively low starting salary with a Ph.D., likely to be a Foreign National, prone to be in a Midwestern university, and willing to relocate globally. Generally, the Ph.D. starting salary would have to increase dramatically to change the minds of graduate students not intending to pursue a Ph.D. including most American graduate students. A change in public policy appears to be the only real solution.American, Agricultural Economists, Ph.D., Salaries, Probit, Labor and Human Capital,

AN ANALYSIS OF DOMESTIC AND EXPORT DEMAND FOR U.S. COTTON

Expansion of the cotton industry depends on economic growth. Models were specified to estimate U.S. domestic and export demand with and without structural change. The results indicate that domestic demand increases with per capita GDP and decreases with rising oil prices. U.S. export demand for cotton expands with lower beginning stocks in the rest of the world and rising per capita income.Crop Production/Industries, Demand and Price Analysis, Industrial Organization,

PROFITABILITY AND RISK OF U.S. AGRICULTURAL BANKS

Study of profitability and risk of agricultural banks is very important in assessing the ability to adequately finance agricultural production and rural development. A recursive system of profitability and risk equations is estimated to compare the performance of agricultural with nonagricultural banks and to identify factors which affect performance. A linear regression model which measures risk-adjusted profitability confirms the results from the recursive system. Results show that agricultural banks perform better than nonagricultural counterparts on average even after controlling for risks and other factors. Further, off-balance-sheet business is found to be negatively related to the risk-adjusted profitability of agricultural banks.Financial Economics,

The United States Tobacco Industry after the Buyout

The elimination of the quota and price support program in 2004 meant limited government intervention and made U.S. tobacco producers more vulnerable to market risks. In this paper we provide an examination of the situation in the U.S. tobacco industry before and after the buyout and identify how the enacted policy change affected the U.S. tobacco industry in terms of supply and demand. The supply and demand system is estimated using the generalized method of moments (GMM). The results suggest that the buyout, which began with lowering the price for tobacco as well as increasing the cost of production, had a negative impact on the number of farmers in the United States as it declined substantially after 2004. However, tobacco producers who remained in the industry apparently became more efficient and more competitive on the world tobacco market in the face of lower tobacco prices. Improved overall competitiveness of the U.S. tobacco industry along with changes in U.S. consumer tastes and preferences for less consumption of tobacco products resulted in an increase in U.S. exports of tobacco leaf after the elimination of the government policy.Agricultural and Food Policy,

THE LATIN AMERICAN ORGANIC COFFEE INDUSTRY: U.S. MARKET INROADS

Certified organic coffee is a minuscule but important portion of coffee production and trade and is the fastest growing sector in sales revenue. Organic coffee has its roots in sustainable crop production and economic development policy. Latin America has become the center of the organic coffee movement, representing a change from the old market structure of the coffee trade. The U.S. organic coffee market has experienced extraordinary growth in the past five years because of an increase in consumer social and ecological awareness. Latin America supplies most of the organic coffee entering the United States, where Mexico, Colombia, and Guatemala are the main exporters. Colombian and Guatemalan organic coffee, according to the survey, receive the highest price premiums because of the perception of superior quality. Surveyed importers and roasters in the United States believe that the organic coffee market will continue to grow at least for the next 10 years. Oversupply, economies of size, and reduced price premiums are seen as the biggest problems to be faced by organic coffee producers in the coming years.Agribusiness, Crop Production/Industries, Industrial Organization,

EXPORT DEMAND FOR U.S. ALMONDS: IMPACTS OF U.S. EXPORT PROMOTION PROGRAMS

The purpose of this study was to estimate the impact of the major factors affecting the export demand for U.S. almonds in Asia and the E.U. which together import about 93% of U.S. almond exports. The primary objective pertained to the impacts of federal promotion programs on the foreign demand for U.S. almonds. Based on previous literature, a single-equation framework was specified for estimation of the almond model. Based on promotion elasticities, impacts on almond export revenue from promotion were evaluated. The marginal return per dollar to decreasing promotion expenditures for almonds was $47.74 for Asia, reflecting prudent promotion expenditures for more efficient utilization of promotion funds as the Asian market for U.S. almonds approaches maturity. The E.U. appears to be a mature market for U.S. almond exports with no detectable responsiveness to promotion expenditures. Thus, simple reminder-type promotion activities for this market may be sufficient.Demand and Price Analysis, Marketing,