Health is King in Good Times and Bad

Posted in: Economics by admin on January 1, 2009 | No Comments

One consistent theme continues to be true through good times and especially during bad times — health
is king. Be diligent in lowering costs.

However, protect herd health. Diseases can strike quickly or cause slow, nagging problems that increase production
costs. Herd health decisions are very difficult and shouid not be made without an accurate picture of the disease risks
on your farm. Work with your local veterinarian to identify which diseases are risks to your herd and which can
be effectively controlled with vaccines or other control measures.

Ethanol and Meat: A Multi-Market Analysis

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In this paper we study the linkage between the ethanol and the meat market by using a multi-market equilibrium displacement model (EDM) that considers six markets – beef, pork, chicken, corn, ethanol, and ethanol byproducts, and their interrelatedness. What we find is that a 10% percent shift in ethanol demand raises the corn price by 4.48%. This leads to a decline in corn demand by 4.05% for cattle, 2.38% for hogs, and 8.55% for chicken. The quantity supplied of byproducts rises by 5.7% and its price 15 declines 3.96%. The price decline leads to 9.5% increase byproduct utilization in cattle sector and 3.11% in the hog sector. We also provide total elasticities of prices and quantities in the meat marketing channel with respect to changes in the price of ethanol, the price of corn, and the price ethanol by products. In all cases the most sensitive sector is the poultry sector, followed by beef and pork.

Hog Outlook

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The expectations for pork production in the United States in 2010 is for a reduction of 1.5
percent by the economist that participated in the 2009 Extension Annual outlooks survey of
the Agricultural and Applied Economics Association. Demand for live hogs in 2010 is expected to be stronger than in 2009 to result in prices for
hogs to average $48.44 per cwt live up nearly 12 percent from 2009. The quarterly prices for
51-52 percent lean live barrow and gilts for 2010 are estimated to be first quarter $45.55 per
cwt, second quarter $49.21 per cwt, third quarter $50.84 per cwt and fourth quarter $47.57
per cwt.

Farm Payments in the EU – their Distribution and Justification

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This paper provides an overview of the development of past and present research and findings on the distributional aspects of direct payments. Used are the theory of federal fiscal relations to identify the policy agendas that should be handled at the EU level, at national levels, and at sub-national levels. It is then analysed how measures of concentration are affected if the criteria of direct payments are changed. Given the results of our simulations it is evident that changing the rules on the allocation of direct payments as the Commission suggested in the ‘health check’ process will affect the distribution. The interesting finding is that changes of the distribution within member states are happening ‘relatively’ easy while the relative ranking of concentration between member states is relatively stable. Only in a scenario of minimum payments of 500 € per holding and year the ranking of concentration between member states changes significantly. Currently CAP payments are hardly motivated by distributive considerations alone. Currently
they are justified to ease the process of integration for the agricultural community of
Member States that have recently entered the EU. Another purpose is to facilitate structural
adjustment of farms that are exposed to freer market conditions after decades of CAP interventions.
Moreover, as direct payments are only granted if standards of good agricultural and
environmental condition (“cross compliance”) are met, such payments have an environmental
facet as well. The current debate about strengthened modulation or abandoning the historical
model provides possibilities to improve the distribution of direct payments. At the same time,
taking into account the principle of “fiscal equivalence” could give guidance for
the question which of the issues currently addressed by direct payments should be addressed at
EU level or at the level of Member States. Income goals and environmental objectives are
brought forward to justify direct payments financed by the CAP budget. From a ‘fiscal equivalence’
perspective both objectives should be handled by Member States, and financed as well.

Swine Economics Report

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USDA’s latest survey of the U.S. swine herd said the market herd was down 1.9% on June 1 and
the breeding herd was down 2.7% compared to 12 months earlier. The total inventory of hogs
was down 2.0%. The breeding inventory was smaller and the market hog inventory was a bit
larger than the average of trade forecasts. Hog slaughter will be down 3-4% this year and hopefully even more in 2010. Unfortunately, there is no end in sight to the string of financial losses plaguing producers.

Government support, transfer efficiency, and moral hazard within heterogeneous regions in Canadian Agriculture

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The objective of this paper is to estimate three measures of transfer efficiency that are of concern to policymakers. These are (1) the capitalization of support into farmland values, (2) the rate of income stabilization, and (3) the effect of past government support on the variance of income. Results show significant differences between Canadian regions in the effectiveness of stabilization. There is a significant inverse relation between government support payments and farm income across all regions. However, for the Maritime Provinces there is a noticeable lower rate of stabilization, as well as an unexplainable upward trend in support. Results for the third objective show that the variance of income is significantly correlated with past levels of government payments. This indicates that government support is motivating producers to make risky decisions, thus creating a moral hazard problem in the Canada agriculture sector.

Animal genetic resource trade flows: Economic assessment

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This paper reports on an analysis of international trade in animal genetic resources from the 1990′s to 2005. It offers an assessment of the major directions, trends, and implications of trade flows, using data from the United Nations COMTRADE database (United Nations Statistics Division, 2007). This information was augmented by discussions with a number of breed societies on their views concerning breeders’ access and utilization of non-U.S. genetic resources. Our analysis of the data leads us to doubt the usefulness of a treaty on animal genetic resources, access and benefit-sharing agreements or other broad policy initiatives as a vehicle for promoting conservation of
threatened breeds or species, and also as a vehicle for improving the welfare of poor livestock farmers in
developing countries. We believe that conservation measures should be pursued urgently, without any explicit link to a treaty or erection of trade barriers. We further believe that efforts to improve the well being of traditional livestock keepers and their farming systems are worthwhile and should be pursued without linkage to broad policy instruments that are ill-suited to meet the needs of the targeted populations. Furthermore, we fear that the financial burdens of negotiating an international agreement and supporting a secretariat and administrative superstructure might reduce the funds available for needed conservation efforts.

Biofuel policies and the environment: the effects of biofuel feedstock production on climate, water quality and biodiversity

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In this paper we examine the multiple environmental effects of policies promoting biofuel production from agricultural crops. We develop theoretical and empirical frameworks and provide an integrated economic and ecological modelling approach: an economic model of farmers’ decision making is combined with a biophysical model predicting the effects of farming practices on crop yields and multiple environmental effects. The analysed environmental effects include GHG emissions over the life cycle, nitrogen and phosphorus runoff, herbicide runoff and the quality of wildlife habitats. Model is applied to crop production in Finland. We found that the overall environmental performance of alternative land use types is mainly driven by the value of CO2-eq emissions and nutrient runoff damage. Herbicide use intensity and resulting herbicide runoff damage have only a marginal effect on the environmental performance of alternative land use types. Incorporation of biodiversity benefits favour rape and reed canary grass over cereals. Social welfare ranking of alternative land use types is mainly driven by profitability of land use rather than the social valuation of environmental effects.

Risk Classification in Animal Disease Prevention: Who Benefits from Differentiated Policy?

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Our goal is to analyze how differently pig farms may contribute to societal costs of an animal disease outbreak, how valuable this information is to different stakeholders, and how it can be used to target risk management measures. For clarity, we focus on a single disease, FMD, but limit our analysis solely on the pig sector. The effects are simulated
conditional on the first infected farm by using numerical dynamic epidemiological and economic models. This approach allows us to study how a certain farm contributes to disease losses, including consequential effects due to disease spread and export distortions, when it is the first farm which becomes infected in the country. It was found that outbreak costs depend heavily on market effects of the disease. Market effects further depend on export distortions and their duration, price elasticity of demand and volume of production affected by restrictive measures. Results also suggest that it can be rational to consider the targeting of surveillance systems and other risk management measures according to the risk category. If risk management is stratified according to the risk posed by a farm, a high-risk farm could be required to ensure higher than average effort for disease costs, because society could benefit from the
reduction of risk class. Low-risk farms, consumers and society can be able to accrue further benefits over time when differentiated liability decreases outbreak costs and re-allocates production to farms with reduced costs. If the elevated liability cost would be imposed on high-risk farms, it could reduce their profits and production. However, farms do not belong to the most risky class only because of their own actions but also because of actions taken by other stakeholders, including their slaughterhouse, animal trading partners and other farms located in the vicinity. The rationale behind differentiating liability is to motivate high-risk farms and other stakeholders which influence their risk to take measures which would reduce their risk exposure. In conclusion, further research based on risk classification offers opportunities to design more cost-efficient preventive measures to combat contagious animal diseases. In particular, it can increase stakeholder engagement in disease prevention by providing more detailed economic criteria to stratify preventive efforts and economic bonuses or fees according to the risk exposure factors.

Medium Term Outlook for Canadian Agriculture International and Domestic Markets

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The purpose of this document is to describe the features of the Agriculture and Agri-Food Canada (AAFC) Medium Term Outlook for Canadian Agriculture covering the period 2008 to 2018. The outlook is an attempt to outline a plausible future of the international and domestic agri-food sectors. It serves as a benchmark for discussion and scenario analysis.
The outlook makes specific assumptions and outlines their implications. Since it assumes that policies remain unchanged from existing legislation, the outlook is not a forecast of future events. In particular there are no assumptions made regarding the outcome of the Doha round of trade negotiations. Finally, it is assumed that there will be no significant animal disease outbreaks or unusual climatic conditions over the period of the outlook. The outlook was produced with two econometric models of agricultural markets based upon information available in November 2008.
The AGLINK/COSIMO model of the Organization for Economic Cooperation and Development (OECD) and of the Food and Agriculture Organization (FAO) was used to produce the international outlook and the AAFC Food and Agriculture Regional Model (FARM) was used for the national outlook. The medium term assumptions used and published by the OECD/FAO in the Agricultural Outlook 2008-2017 are by in large maintained in the AAFC’s outlook but updated to reflect short term price forecasts produced and released by the U.S. Department of Agriculture (USDA) in November 2008. The November 2008 macroeconomic forecast published by the International Monetary Fund (IMF) was
also incorporated in the outlook and in particular a 32% reduction in the crude oil price in 2009. AAFC assumed that 3 years will be necessary before the crude oil price returns to the level used in the OECD/FAO medium term outlook. The outlook for crop year 2008-09 and 2009-10 may not coincide with the forecast published in AAFC January Bi-Weekly Bulletin because this publication takes into account more recent information. The Canadian macro-economic forecasts for 2008 to 2013 are from the Conference Board of Canada outlook published in December 2008 except for the crude oil price and the exchange rate in 2009, 2010 and 2011 which reflects the IMF outlook. The average year-toyear percentage change over that period is used for the remainder of the outlook period for each macro-economic variables used in FARM.