Stochastic non-parametric frontier analysis in measuring technical efficiency : a case study of the North American dairy industry

Regulatory institutions governing many industries in Canada are similar to those of the United States. Some differences in regulations and institutions can be found in those industries for which the two countries compete in export markets, and many agricultural products fall into the latter category. With respect to the production and export of dairy products, Canada has recently implemented policies that are substantially different from those found in the U.S. Differences in dairy policy have been the source of several recent trade disputes between the two countries. Despite efforts to the contrary by participants in the major policy agreements governing agricultural trade (i.e., CUSTA; NAFTA, and WTOA), the regulated structure of the Canadian dairy industry has been maintained. The U.S. and New Zealand have challenged the marketing practices of the supply managed by Canadian dairy sector. These policies have a direct impact on the productive efficiency of dairy farms. In this regard, the dairy industry in Canada and the U.S. provides a natural context for an experiment allowing us to compare the relative performance of otherwise almost identical producers under different agricultural policies. The objective of this thesis is to estimate and compare the technical efficiency of a large set of dairy producers in Canada (Ontario and Quebec), with their counterparts in the U.S. (New York and Wisconsin) by using a stochastic nonparametric frontier regression analysis. Our motivation for using stochastic nonparametric frontier estimates comes from the fact that there are problems inherent in the structure of stochastic parametric frontier models. Specifically in the latter models, the literature has shown that the efficiency scores are sensitive to the choice of both functional forms and the distribution assumptions made about the one-sided random component of the composed error term. To solve this econometric model, an iterative procedure called a smoothing process is used to estimate the mean response function and its parameters constructed in a generalized additive model. Using the method of locally scoring smoothing, the parameters of the regression function are estimated by employing two separate nonparametric techniques: locally weighted scatterplot smoothing (LOWESS), and spline smoothing. After estimating the response function and its parameters, the technical efficiency scores are computed. These efficiency indices are also compared with the one obtained from conducting a stochastic parametric (translog) frontier function. The results show that the overall mean technical efficiency obtained from translog function for all regions is higher than that of the corresponding values obtained from the nonparametric approaches. Both parametric and nonparametric methodologies indicated evidence of differences between the mean technical efficiency of dairy farms in all regions. This means various policies implemented in the two countries significantly impacted the performance of dairy producers. The direction of these differences was in the favor of U.S. dairy farmers, who produced milk more efficiently than their Canadian counterparts. This implies that the regulated dairy industry in Canada has led to lower technical efficiency of Canadian dairy farmers. Canadian farmers surely benefited financially from the implementation of supply management over the duration of this study, but from an efficiency perspective, policymakers might to realize that the current support policy is only sustainable at a cost. Furthermore, Canada's commitments to international agreements such as the WTO may no longer readily allow the federal government and the provinces to pursue some elements of the current supply management policy

Assessing Consumer Preferences for Organically Grown Fresh Fruit and Vegetables in Eastern New Brunswick

consumer preferences, organic fresh produce, willingness-to-pay, Consumer/Household Economics, Crop Production/Industries, Demand and Price Analysis, Q1,

Consumer Choice between Food Safety and Food Quality: The Case of Farm-Raised Atlantic Salmon

Since the food incidence of polychlorinated biphenyls in farm-raised Atlantic salmon, its market demand has drastically changed as a result of consumers mistrust in both the quality and safety of the product. Policymakers have been trying to find ways to ensure consumers that farm-raised Atlantic salmon is safe. One of the suggested policies is the implementation of integrated traceability methods and quality control systems. This article examines consumer choice between food safety and food quality to purchase certified farm-raised Atlantic salmon, defined as a product that has passed through various stages of traceability systems in the province of Newfoundland and Labrador, Canada

Consumer Perceptions of Environmentally Friendly Products in New Foundland and Labrador

A stated-preference model was specified by a logit model to analyze consumers’ willingness-to-pay a five-per cent premium to purchase environmentally friendly products in Newfoundland and Labrador. Although the industry suffers from insufficient number of certified producers in the region, the findings from the model reflect the existence of potential demands for environmentally friendly products. Results showed that survey respondents were willing to pay at least a five-per cent premium, as they believed pesticide residues would have negative impacts on their health conditions. In addition, being married, higher degree of education, knowledge about new methods of farming practices, such as integrated-pest management, and early adopters in trying newly introduced products were among the factors affecting consumer decisions in paying the premium

Assessing the Determinants of Food Security Status in Bangladesh: A Micro-Econometric Analysis

Food security is an intricate issue which includes diverse aspects as well as many linkages. In Bangladesh, food security is tried to be achieved by increasing the production of rice both by employing modern agricultural technology as well as by increasing the area under rice production. Despite the impressive gains in increasing domestic food grain production, problems of food and nutrition security still remain. Bangladesh is yet to achieve comprehensive food security that resolves the problems of inadequate food intake and chronic malnutrition among those who are poor and vulnerable. The main objective of this paper is to the contribution of different factors behind household food security status of 180 households in three Northern districts of Bangladesh. The study area was chosen because relatively little energy consumption data are available concerning this geographical area. The study used both primary and secondary data. Food security status of each household was assessed on the basis of the food security line using the daily calorie intake recommended by FAO. This method has proven to be efficient in measuring food security at household level. Additionally, the use of a logistic regression model identified the factors that plays crucial role in determining the food security status of the households. Results from the food security index revealed that more than 60 percent of households were with food insecurity. In addition, we found that total monthly household income, age of household head, education level of household head, household size, farm size, gender of household head, livestock ownership and quantity of cereal production had significant influence on food security status at the household level

An application of the residual deviance analysis in testing input separability restrictions

Using the analysis of residual deviance, the separability of input in the Quebec dairy industry between 1990 and 1998 is examined. A nonparametric production regression function based on the theory of generalized additive models is estimated by using the spline smoothing approach. Results support that all additive inputs are separable.

A nonparametric extension of generalized quadratic Box-Cox models in measuring technical efficiency

This article uses a nonparametric extension of estimating Generalized Quadratic Box-Cox (GQBC) models using the Additivity and Variance Stabilization (AVAS) algorithm. The new method accounts for random noise in the data and relaxes the sensitivity of technical efficiency scores to the choice of functional form. It also provides more flexible choices for estimating the parameter of the dependent variable. The model is specified to measure technical efficiency scores of New York dairy producers in the period 1990 to 2000. Results show that the sample producers did not use resources efficiently, as the estimated mean technical efficiency score was found to be 0.663.

TRADE IN THE MARKET OF BIOTECHNOLOGICAL LIVESTOCK PRODUCTS AND THE THEORY OF THE INTERMEDIARY FIRMS

This paper was presented at the INTERNATIONAL TRADE IN LIVESTOCK PRODUCTS SYMPOSIUM in Auckland, New Zealand, January 18-19, 2001. The Symposium was sponsored by: the International Agricultural Trade Research Consortium, the Venture Trust, Massey University, New Zealand, and the Centre for Applied Economics and Policy Studies, Massey University. Dietary changes, especially in developing countries, are driving a massive increase in demand for livestock products. The objective of this symposium was to examine the consequences of this phenomenon, which some have even called a "revolution." How are dietary patterns changing, and can increased demands for livestock products be satisfied from domestic resources? If so, at what cost? What will be the flow-on impacts, for example, in terms of increased demands for feedgrains and the pressures for change within marketing systems? A supply-side response has been the continued development of large-scale, urban-based industrial livestock production systems that in many cases give rise to environmental concerns. If additional imports seem required, where will they originate and what about food security in the importing regions? How might market access conditions be re-negotiated to make increased imports achievable? Other important issues discussed involved food safety, animal health and welfare and the adoption of biotechnology, and their interactions with the negotiation of reforms to domestic and trade policies. Individual papers from this conference are available on AgEcon Search. If you would like to see the complete agenda and set of papers from this conference, please visit the IATRC Symposium web page at: http://www1.umn.edu/iatrc.intro.ht

The role of the agritourism management in developing the economy of rural regions

It has been documented that the key features which relate rural regions to tourism development are twofold: poverty and lack of economic opportunities. Despite of substantial contribution the tourism and agritourism industries have made to the economy of rural areas, farm-managers have been facing a series of challenges, such as the turmoil of global economy, increased worldwide competition in output markets, high production costs arisen from increasing inputs prices, and lack of transparent rules and regulations imposed by the governmental agencies. As a result, farm-operators have been searching for alternative farm-oriented activities that potentially generate additional income to their on-farm revenues so that they can stay in such a highly competitive business. This paper analyzes the role of the agritourism management in developing the economy of rural areas in the province of Newfoundland and Labrador, Canada. The recommendations made from the results of this study provide new visions for policymakers to understand better the industry, recognize the impediments, and make appropriate decisions at the local and provincial level