COMMODITY INDEX FUNDS AND PRICE SWINGS: CONDITIONS OF CAUSALITY

The role played by “speculators” during the 2007/08 food price spike is lively disputed. Our analysis focuses on the increasing participation of index funds in agricultural commodity futures markets before the food price spike. Our central theme is to determine if their prespike massive entry does prepare the subsequent crisis by maintaining low stock levels. We develop a theoretical model explaining the behaviour of speculators and traders on futures and cash markets. We allow index funds to inflict an informational externality on commercial traders that is supposed to induce a lower desire to hold stock. We find out that, once the production decisions of commercial traders are taken into account into the model, the increased net long position of index funds is inconsistent with lower stocks. We therefore conclude that commodity index funds are not a systematic cause of high market swings and that other relevant causes should be further studied.Futures markets, commodity price, index funds, stocks, Food Consumption/Nutrition/Food Safety, Risk and Uncertainty,

Bridging Micro- and Macro-Analyses of the EU Sugar Program: Methods and Insights

Crop Production/Industries,

Accounting for agronomic rotations in crop production: A theoretical investigation and an empirical modeling framework

As far as crop acreage choices are concerned, a consensus seems to exist among agricultural scientists and extension agents: crop rotation effects and the related constraints are major determinants of farmers’ crop choices. Crop rotation effects are inherently dynamic. They are generally ignored in multicrop models with land as an allocable input found in the literature since most of these models are developed within a static framework. The aim of this paper is twofold (i) to propose a new approach and tools for investigating dynamic crop acreage choices accounting for crop rotation benefits and constraints and (ii) to illustrate the impacts of crop rotation effects and constraints on farmers’ acreage choices through simulation examples. The models proposed in this paper are sufficiently simple for being empirically tractable either in simulation studies or in econometric and mathematical programming analyses. Our simulation results tend to show responses of the optimal dynamic acreages to simple price shocks which are much more complex than those implied by static models. They also demonstrate that farmers’ perceptions of the future economic context are crucial determinants of their acreage choices. In fact current acreage choices may appear suboptimal in a static sense but are fully consistent when dynamic effects of crop rotations are specified.Crop rotation, Dynamic programming, Acreage choice, Crop Production/Industries, Land Economics/Use, Q12, D21, D24, D92,

The decoupling of farm programs: Revisiting the wealth effect

Recent reforms of agricultural policies in developed countries introduced direct payments to the detriment of traditional production enhancing instruments. Whereas these new instruments can influence production through several effects, current empirical studies do not show any significant impact on production; direct payments mainly increase land values. In this article, we revisit the evaluation of the coupling effects passing through the wealth of agricultural households. The initial wealth of these agents, while being mainly in form of land asset holding, is always assumed to be fixed. On the contrary we show theoretically and empirically that, once the impact of farm programs on initial wealth is properly accounted for, the measure of the coupling effects is considerably increased for direct payments and more much marginally for traditional policy instruments. We illustrate the impact of this initial wealth actualisation through a simulation of the suppression of the US corn policy. The impact of this policy was underestimated by two thirds.agricultural policy, decoupling, wealth effect,

Measuring farmers’ risk aversion: the unknown properties of the value function

We argue in this paper that available econometric estimates of farmers’ risk aversion do not measure true farmers’ preferences towards risky outcomes. Available analyses are mostly of static nature and indeed measure the parameters of the synthetic optimal value function rather than the deep parameters of the utility functions. We derive analytical and empirical results in a simple dynamic and stochastic framework showing that that there is not a simple relationship between utility functions and value functions when agents have many decision variables. In particular we find that the value function does not necessarily exhibit DARA when the instantaneous utility function satisfies DARA and conversely. We recommend performing dynamic econometric estimation with at least farm production and consumption data.Risk and Uncertainty,

Applying the gravity approach to sector trade: Who bears the trade costs?

Thanks to its empirical success, the gravity approach is widely used to explain trade patterns between countries. In this article we question the simple application of this approach to product/sector-level trade on two grounds. First, we demonstrate that the traditional Armington version of gravity must be altered to properly account for the fact that sector expenditures are not strictly equal to sector productions because some trade costs are incurred outside the sector of interest. Secondly, we test empirically the mis-measurement of the expenditures with both Armington (1969) and Helpman and Krugman (1985) approaches. We estimate trade flows and prices simultaneously with non linear techniques. Underestimated expenditure levels yield biased values of model parameters.gravity, trade, econometric simulation

PROMOTING MULTIFUNCTIONALITY WHILE MINIMIZING TRADE DISTORTION EFFECTS: THE RELATIVE MERITS OF TRADITIONAL POLICY INSTRUMENTS

In relation to the growing debate around multifunctionality, this paper attempts to classify alternative measures of agricultural income support according to their ability in achieving three policy objectives (supporting agricultural income, promoting positive externalities and reducing negative ones) as well as to their induced trade distortion effects. Four income support programs are considered: a production-linked payment program, a land-based payment program and two decoupled payment programs. Their effectiveness as regards to the three policy objectives and their relatives induce trade distortion effects are examined on an equal cost/support basis through a conceptual framework that allows for free entry in the sector and the land price to adjust endogenously. Analytical results show clearly that no program uniformly dominates others. They also allow to identify the key parameters that have a substantial bearing on the relative merits of these programs.International Relations/Trade,

Impacts des biocarburants sur l’agriculture européenne,

Si l’intérêt des biocarburants pour la sécurité énergétique et la lutte contre le réchauffement climatique est aujourd’hui fortement débattu en Europe, nul ne conteste qu’ils ont un effet bénéfique sur l’agriculture européenne. Nous évaluons les impacts sur les différents marchés et revenus agricoles européens d’une application complète de la directive européenne de promotion de ces biocarburants. Cette évaluation tient compte des possibilités d’importation de ces produits en provenance du marché mondial ainsi que des effets induits sur l’élevage. Nous montrons des effets substantiels sur les marchés des grandes cultures et des effets très modestes sur les marchés des produits d’élevage. Le revenu agricole total augmente mais de manière limitée par rapport aux dépenses pubiques injectées.

La réforme de la PAC de 2003 et le régime du paiement unique : impacts de différentes options de mise en œuvre au niveau français

La principale innovation de la réforme de la PAC de 2003 par rapport aux précédentes est l'introduction du régime du paiement unique. Le principe général est de briser le lien entre le soutien des revenus agricoles et l'acte de production agricole. Toutefois, cette réforme autorise certaines dérogations à ce principe général, et ce à la discrétion des Etats membres. L'objectif de cet article est d'évaluer au niveau français les conséquences sur les marchés et les revenus de quatre options de mise en oeuvre de ce nouveau régime. Les simulations montrent que les impacts sur les marchés agricoles sont relativement peu sensibles à ces options, à la différence des revenus agricoles. Selon nos simulations, la possibilité d'introduire une aide unique à la surface fourragère à la place des aides directes animales apparaît comme un possible compromis entre les différents enjeux.