Cross Compliance and Competitiveness of the European Beef and Pig Sector

Posted in: Economics by admin on January 1, 2008 | No Comments

Cross compliance, introduced with the 2003 CAP reform, links direct payments to
farmers to their respect of regulations in the field of environmental protection, public, animal
and plant health and animal welfare. This paper focuses on the additional costs cross compliance may generate in
the beef and pig sector. For both products the most relevant standards were identified and an
assessment was made of the level of compliance and the cost of compliance. The subsequent
analysis then focused, first, on the additional cost of compliance if compliance levels were to
become universal, and second, on the impact this would have on trade flows of the EU with
the US and other competitors on the world market. The second section of this paper is dedicated to the impact of the Nitrate Directive and Regulations that are currently applicable to pigs farms. It was found that the extent to which the Nitrate Directive may create extra costs to the pig sector
depends on the pig density per hectare in each Member State, on the percentage of pigs
present in Nitrate Vulnerable Zones and on the degree of compliance of pig farmers to the
Nitrate Directive. These three data differ very much from country to country and explain
primarily the very different sector cost increases for the pig sectors of EU Member States. The
overall EU cost increase to be attributed to the pig sector due to attain full compliance with
the Nitrate Directive has been estimated at 0.55%.
From a comparison with the impact of the Clean Water Act in the US it turns out that
this act raises the cost for the American pig sector with 1.08%, an almost double cost effect
compared to the impact of the Nitrate Directive in the EU. The reason for this substantial rise
of costs has to be attributed to the large percentage of pig affected by this measure and its
rather recent application to US pig farms, which still implies a rather low degree of
compliance.
A calculation of the animal welfare regulations for pig farmers in the EU shows, that
the cost increase is very limited. The reasons for this minor cost impact are a high degree of
compliance with the standards and the limited rise of costs for farmers which still have to
adapt their farm to the new legislation.

Relational Contracting and Allocation of Decision Rights in the Agri- Food Industry: Producer Contracts and Food Safety

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We applied a formal theoretical model of adaptation to two empirical settings within the agrifood
industry: specialized pig production and food safety in Denmark. The objective is to allocate
decision rights ex ante so that actual decisions taken ex post will optimize the profit accruing
to the two parties in a contractual or integrative relation.
Two applications have been presented in this paper: First an actual partnership between two
pork producers in Denmark. Based on detailed budgets we develop detailed schedules for the
“reneging temptations” of the two partners- These are the temptations to renege on the contract
during the evolution of the partnership. Using a model developed by Baker, Gibbons and Murphy
(2006) we calculate equilibria using the Folk theorem in order to determine which is the
best allocation of decision rights. We find that the existing allocation of decision rights in the
case we examine is efficient in the sense that it results into a second best allocation.
Using the same modelling approach we presented a second application on salmonella control
related to end-feeding, that is, salmonella contamination of pork due to filled bellies of pigs fed
for the last 12 hours before delivery. Based on appropriate assumptions, the parties should give
the decision right (whether to end-feed or not) to the slaughterhouse in order to reach the firstbest
solution which, given the assumptions, is feasible

A Partial Equilibrium Model of the Linkages between Animal Welfare, Trade and the Environment in Scotland

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Mechanical refrigeration, seasonality, and the hog–corn cycle in the United States: 1870–1940

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This paper examines the role of mechanical refrigeration in seasonality and structural change in the U.S. hog–corn
cycle, 1870–1940. This period covers an era in which the widespread adoption of mechanical refrigeration greatly affected the ability to store and transport perishable commodities. These developments in turn altered the seasonal production and price structure for many commodities, including pork. We use a new class of time series models, time-varying smooth transition autoregressions (TV-STARs), to document both the structural change and the nonlinear features observed in seasonal patterns for the U.S. hog–corn price relationship during the late nineteenth and early twentieth centuries.

U.S. Market Potential for Dried Distillers Grain with Solubles

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Meeting the demand: An estimation of potential future greenhouse gas emissions from meat production

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While a number of papers have estimated meat consumption patterns,3 this paper makes the following contributions to the literature on consumption patterns and the environment. First, I include data on prices to capture price elasticity effects. Second, I add a parameter for lagged consumption in order to observe howmuch of meat consumption is due to either partial adjustment or persistence effects. Third, I differentiate meat into beef, chicken and pig products and estimate separate equations. Fourth, I forecast meat consumption using these estimates to the years 2010, 2020 and 2030. I bring together data on greenhouse gas production for the US and Europe in order to approximate the present and forecast the future potential environmental impact of meat consumption under a CAFO system. The main findings of the paper are as follows. First, if current consumption patterns continue, the amount of total
meat consumed in the year 2030 will be 72% higher than the amount consumed in 2000, lead mostly by large increases in
chicken and pig consumption. Second, the production of this meat in 2030, under CAFO systems, will produce almost 1.9
billion tonnes of greenhouse gases. Finally, while there are some solutions to limit this effect, they will be very difficult to implement. Thus, if nations are serious about cutting their production of greenhouse gases, meeting future meat demand will need to be a serious area of discussion for policy makers.

Liability Risks in Agri-food Supply Chains: the Case of Wet Feed

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Due to a number of crises in the animal feed
sector, which caused substantial damage in
livestock supply chains, the issue aroused of
increasing the liability insurance coverage for
animal feed producers. In this framework, the
objective of this project is to carry out a
quantitative risk analysis for wet feed producers
in the Netherlands, which could subsequently be
used as a basis for (re)designing liability
insurance schemes. The sensitivity analyses showed that the size of
farms supplied with wet feed and the number of
days in which contaminated wet feed is delivered
are key variables in determining the eventual size
of damage.

Producer incentives and plant investments for Salmonella control in pork supply chains

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This paper presents a unified analysis of dynamic producer incentive systems for
Salmonella control in primary production and slaughter plant investments in Salmonella
control measures. We identify optimal incentive system parameters and cost-effective
control strategies for achieving various levels of Salmonella prevalence. We compare
the performance measures of the combined plant-level control and producer incentive
system with results obtained under a producer incentive system only. The combined
system allocates control effort among producers and the slaughter plant, resulting in
25–83 per cent lower expected total control cost for a wide range of threshold values.

Modelling the Spatial Structure of Pig Production in Denmark

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In this study we analysed the impact of
agglomeration externalities, input and output market
access, and environmental regulations on the location
of pig production in 1999 and 2004 in Denmark. The
results show that spatial externalities are important for
location of pig production, i.e. pig farms have higher
profit if there is a high concentration of pigs in the
neighbourhood. This indicates that pig farms benefit
from input sharing, labour pool matching and
knowledge spillovers. On the other hand, we found no
or only a week effect of input and output accessibility.
However, we did not expect to find a strong effect of
accessibility of slaughterhouses due to the
organisational structure of the Danish slaughterhouse
sector, i.e. farmer-owned slaughterhouses and farmers’
distance-independent payment of transport costs. The
lacking impact on location of input accessibility may
be caused by weak instruments for the accessibility of
industrial feed. Finally, we found that the
environmental regulations imply a negative
agglomeration externality. The econometrical analysis
showed that it is important to consider that
explanatory variables in a location model may be
endogenous. The analysis showed also that it is also
important to consider the potential spatial dependence
in the error terms.

Relational Contracts and Adaptation: Application to a Pork Producer Contract

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Contractual arrangements are a very common form of governance in agri-food chains. Contracts are used to coordinate production and distribution of agricultural products and inputs in many sectors, of which some examples are in broiler and in pork. In this article, we apply a model of relational contract between two Danish pork producers. When designing relational contracts such as this partnership between Farmers N
and J, it is usually based on budgets that are rather static based on assumptions
regarding average prices and cost levels. To fit into the adaptation framework, we
made dynamic budgets showing the payoffs to both parties at various states and with
different actual decisions taken after each state was revealed. This exercise in itself
seems to be rather valuable. It provides not only insight to the profit accruing to each
party given their expectations but also induces the parties to have a detailed
discussion on how allocation of the decision rights affects the potential outcome.
Regarding the specific case, we found that they have allocated decision rights in
such a manner that actual decisions on quality will be taken to protect the relation
and maximize the total shared profit.