Many agricultural producers face cash price distributions that are effectively truncated at a lower limit through participation in farm programs designed to support farm prices and incomes. For example, the 1996 Federal Agricultural Improvement Act (FAIR) makes many producers eligible to obtain marketing loans which truncate their cash price realization at the loan rate, while allowing market prices to freely equilibrate supply and demand. This paper studies the effects of truncated cash price distributions on the optimal use of futures and options. The results show that truncation in the cash price distribution facing an individual producer provides incentives to trade options as well as futures. We derive optimal futures and options trading rules under a range of different truncation scenarios. Empirical results highlight the impacts of basis risk and yield risk on the optimal futures and options portfolio.

An agronomic crop growth model—the Decision Support System for Agro-Technology Transfer—and a constant relative risk aversion utility function are used to examine corn irrigation strategies in Mitchell County, Georgia. Precipitation contracts are designed to help farmers manage risk. Three conclusions originate from the findings. First, the optimal irrigation strategy can greatly increase producers' certainty-equivalent revenue. Second, changes in water pricing policy would have a limited impact on the amount of water used. And third, across levels of risk preference, the precipitation contracts are not effective in increasing certainty-equivalent revenue or reducing cumulative water use.

Among Conservation Reserve Program (CRP) participants, there is a distinction between farm households using the program to ease out of farming and those using the program to augment production receipts. We find evidence that factors other than crop or livestock revenue and environmental factors are associated with program participation and acreage enrollment among farmers who continue agricultural production. Program payments and farm size are positively associated with the amount of land enrolled in the CRP, and characteristics of participants in land retirement and working-lands CRP components are similar.

Managers of business firms, large or small, farm or nonfarm, must make investment decisions under conditions of risk and uncertainty. However, in evaluating investments, the assumption of perfect knowledge has often been used to simplify the analysis. For example, an estimate of average annual net returns is frequently discounted into perpetuity to evaluate a real estate investment alternative. Capital budgeting literature suggests a number of approaches to evaluating alternative investments. However, use of concepts such as the payback period, average rate of return, internal rate of return and net present value embodies the assumption of perfect knowledge.

Coastal marine wetlands, in their natural state, are important biological and hydrological resources. Wetlands yield numerous valuable services such as provision of nursery and feeding habitat for fish and wildlife, and the assimilation of wastes. Wetlands, when filled or otherwise altered, also provide valuable sites for residences, marinas, or ports. Because well defined and vendable property rights are lacking for natural unaltered wetland services but are available for development services, the unregulated market will tend to reflect only the benefits of development. The result has been a rate of conversion of tidal wetlands that has been unsatisfactory to many individuals.

Using annual Japanese fresh fruit import data from 1971 to 1997, this study analyzes the import patterns of Japan's seven most popular fresh fruits by implementing and testing a general differential demand system that nests four alternative import demand specifications. When tested against the general system using the five-good case (bananas, grapefruits, oranges, and lemons and aggregating pineapples, berries, and grapes), the analysis rejects the Almost Ideal Demand System and National Bureau of Research specifications but does not reject Rotterdam and Central Bureau of Statistics models. When estimated using the six-good case (bananas, grapefruits, oranges, lemons, and pineapples and aggregating berries and grapes), the analysis rejects all specifications except the Rotterdam model.

This article examines whether the assumption of perfect competition in the U.S. dairy industry biases the findings of economic impacts of generic dairy advertising. An imperfect competition model based on an approach similar to that of Appelbaum is developed and used to evaluate generic milk advertising. The results are compared with a perfect competition model. The findings indicate positive price and quantity impacts due to generic advertising. The differences in magnitude of impacts between the two models are small, suggesting that the assumption of perfect competition for U.S. dairy models is plausible.

The impact of an urban growth boundary (UGB) on land development in Knox County, TN is estimated via two-stage probit and neural-network models. The insignificance of UGB variable in the two-stage probit model and more visible development patterns in the western part of Knoxville and the neighboring town of Farragut during the post-UGB period in both models suggest that the UGB has not curtailed urban sprawl. Although the network model is found to be a viable alternative to more conventional discrete choice approach for improving the predictability of land development, it is at the cost of evaluating marginal effects.

Nitrate contamination of municipal and domestic well water supplies is becoming an increasing problem in many rural and urban areas, raising the cost of providing safe drinking water. The objective of this paper is to describe a marketable permit scheme that can effectively manage nitrate pollution of groundwater supplies for communities in rural areas without hindering agricultural production in watersheds. The key to implementing this scheme is being able to link nitrate leaching from nitrogen fertilizer applied to crops at a farm to nitrate levels measured at a drinking water well.

The U.S. poultry industry has spent considerable resources to date preparing for an outbreak of avian influenza in this country. This research quantifies the potential effects of two alternative avian influenza scenarios on the poultry industry. In addition, this research looks at effects on other agriculture sectors including the loss of feed demand from an outbreak and the impacts on aggregate measures like farm income and consumer food expenditures. The economic sector model maintained by the Food and Agricultural Policy Research Institute (FAPRI) is employed for these scenarios.

Potential benefits of variable rate nitrogen application are illustrated and information needs identified. Lower costs of precision farming services, higher crop prices, and greater divergence in yield response potentials across management zones reduce the spatial variability required for profitable variable rate application. Information needs include identification and measurement of management zones within a field and estimation of management zone yield response functions, crop and input prices, and the cost of precision farming services.

An economic threshold of agricultural pest management is derived. Results provide a method for researchers to use in making improved pest control recommendations to farmers without farm level decisionmaking. An empirical illustration for lesion nematode management in irrigated corn is given and directions for further research are indicated.

This study adopted the scaling approach to examine the impacts of inventories on tuna auction prices in Japan using the Rotterdam inverse demand system. The inclusion of two inventory variables in the model only increases the number of parameters by two. Results indicate that frozen tunas are more likely to be close substitutes, fresh and frozen tunas of the same species are also likely to be substitutes, and inventory had significant impacts on auction prices.

This research analyzes two groundwater conservation policies in the Kansas High Plains located within the Ogallala aquifer: 1) cost-share assistance to increase irrigation efficiency; and 2) incentive payments to convert irrigated crop production to dryland crop production. To compare the cost-effectiveness of these two policies, a dynamic model simulated a representative irrigator's optimal technology choice, crop selection, and irrigation water use over time. The results suggest that the overall water-saving effectiveness can be improved when different policy tools are considered under different conditions. High prevailing crop prices greatly reduce irrigators' incentive to give up irrigation and therefore cause low enrollment and ineffectiveness of the incentive payment program. In areas with low aquifer-saturated thickness, the incentive payment program is more effective, whereas in areas with relatively higher water availability, the cost-share program could be a better choice.

Typical supermarket chickens are produced with novel or controversial attributes. This continues despite contrasting growth in consumer interest in organic and natural foods. This study surveyed Delaware consumers' likelihood to purchase chicken given different attributes: free range, given antibiotics, irradiated, fed genetically modified (GM) feed, GM chicken, and price. Examining conjoint analysis data with a heteroskedastic two-limit tobit model, GM chicken and other novel attributes were found to lower purchase likelihood significantly. Understanding these results should help the industry meet consumer preferences while aiding its continued expansion to benefit workers and growers across the South.

Hurricanes have caused substantial damage in parts of the U.S. Damages are increasing, perhaps as part of a natural cycle or perhaps in part related to global warming. This paper examines the economic damages that hurricanes cause to U.S. agriculture, estimates the increased damage from an increase in hurricane frequency/intensity, and examines the way that sectoral reactions reduce damages. The simulation results show that hurricanes and associated adjustments cause widespread damage and redistribute agricultural welfare. We find that crop mix shifts of vulnerable crops from stricken to nonstricken regions significantly mitigate hurricane damages.

Japanese import demand for U.S. beef and pork products and the effects on domestic livestock prices are econometrically estimated. Japan is the most important export market for U.S. beef and pork products. Results indicate foreign income, exchange rates, and protectionist measures are statistically significant. The comparative statics quantify the effects of recent economic volatility. For example, the 1995-1998 depreciation in the Japanese yen (39%) reduced U.S. slaughter steer and hog prices by $1.29 per cwt and $0.99 per cwt, respectively, while the 1994-1998 reduction in tariffs (14%) increased slaughter steer and hog prices by $0.49 per cwt and $0.33 per cwt, respectively. Livestock producers will continue to have a vested interest in Asian trade liberalization policies.

Dual-purpose winter wheat production is an important economic enterprise in the southern Great Plains of the United States. Because of the complex interactions involved in producing wheat grain and beef gain from a single crop, stocking density is an important decision. The objective of the research is to determine the stocking density that maximizes expected net returns from dual-purpose winter wheat production. Statistical tests rejected a conventional linear-response plateau function in favor of a linear-response stochastic plateau function. The optimal stocking density of 1.48 steers/ha (0.60 steers/acre) is 19% greater with a stochastic than with a nonstochastic plateau.

U.S. ethanol production capacity increased more than threefold between 2002 and 2008. We study the effect of this growth on corn acreage. Connecting annual changes in county-level corn acreage to changes in ethanol plant capacities, we find a positive effect on planted corn. The building of a typical plant is estimated to increase corn in the county by over 500 acres and to increase acreage in surrounding counties up to almost 300 miles away. All ethanol plants are estimated to increase corn production by less than their annual requirements.

This study uses a bivariate probit model with partial observability to examine Louisiana beef producers' awareness of the Environmental Quality Incentives Program (EQIP) and how awareness translates to application to the program. Results indicate that awareness of and application to the EQIP depend on portion of income derived from off-farm sources, extent of previous best management practice adoption at one's own expense, household income, farmed land that is highly erodible, contact with Natural Resource Conservation Service and extension service personnel, and producer age.