2018

Shon Ferguson, Research Fellow, Research Institute of Industrial Economics
Stockholm, Sweden

Using detailed census data covering over 40,000 farms in Alberta, Saskatchewan and Manitoba, Canada, we document the vast and increasing farm size heterogeneity, and analyze the role of farm size in adapting to the removal of an export subsidy in 1995. We find that larger farms were more likely to switch to new labor-saving tillage technologies in response to the large negative shock to grain prices caused by the reform. Small- and medium-sized farms responded to the reform by adopting the more affordable minimum tillage technology. We develop a simple model of heterogeneous farms and technology adoption that can explain our findings. The results suggest that farm size plays a crucial role in determining farm-level adaptation to agricultural trade reform. Consistent with the Alchian-Allen hypothesis, the increase in per-unit trade costs due to the reform was associated with farms shifting their production of crops from low value wheat to higher value canola.

Ziad Ghaith, PhD Candidate

Canada has recently concluded negotiations on two trade agreements: Trans-Pacific Partnership (TPP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The two agreements include major Pacific-Rim countries, with the latter agreement excluding the United States (US). Both agreements, TPP and CPTPP, provisions for market access include; elimination of barriers to trade, investment among various member countries, and a potential economic impact on the member countries, including Canada. This study assessed the likely economic impact of TPP and CPTPP agreements on Canada’s national economy, and on Saskatchewan’s provincial economy in 2030 (the projected date of full implementation). This was accomplished by building two static Computable General Equilibrium (CGE) models: National and Subnational utilizing the Global Trade Analysis Project (GTAP) database. Three scenarios were simulated to capture the economic impact of TPP and CPTPP on Canada and Saskatchewan: (i) In the first scenario, baseline scenario; the study developed a growth projection model to simulate the economic and trade growth in 2030 without the TPP/CPTPP. (ii) In the second scenario, TPP12 scenario; the study assumed that the TPP agreement would be fully implemented by 2030. (iii) In the third scenario, TPP11 scenario; the study simulated CPTPP agreement, assuming that 11 Pacific-Rim countries (including Canada) do business in spite of the absence of the US. All of these scenarios were simulated under the assumption that North American Free Trade Agreement (NAFTA) is in place. The study showed that both TPP12 and TPP11 would generate long-term economic gains for Canada and Saskatchewan. If the TPP is fully implemented in the absence of the U.S. (Scenario TPP11), the impact on Canada would be similar to TPP12 scenario, although a major trade diversion from the US towards other TPP member countries would occur.

Melat Adde, M.Sc. Candidate

Institutions have been shown to play a major role in lowering transaction costs in agricultural markets. Transaction costs are the costs associated with searching for information regarding a product or its market, negotiating a deal and enforcing the terms of the deal. In situations where transaction costs are high due to missing or weak markets and institution, people have relied on different mechanisms including social capital to deal with this costs and carry out transactions. This study examines the role formal and informal institutions play in the chickpea market in Northern Ethiopia using a structural equation model (SEM). The study finds that institutions facilitate chickpea marketing through improving trust and information sharing among trading partners.

Shawn Ingram, M.Sc. Candidate

Grasslands provide a wide array of ecosystem services including carbon sequestration, wildlife habitat, and wetland preservation. However, these benefits may be undersupplied as landowners typically have limited or no financial incentive for providing ecosystem services. Past research suggests that economic incentives, for example as provided by policy, might be required to encourage ranchers to adopt management practices that can increase ecosystem services on grasslands (Gao et al., 2016; Kemp and Michalk, 2007; Kemp et al., 2013; Klimek et al., 2007; Narloch, Drucker, and Pascual, 2011). This research aims to identify acceptable policy parameters and the willingness-to-accept (WTA) of Saskatchewan ranchers for participating in potential conservation programs to increase provisions of ecosystem services on grasslands. Preliminary results agree with past findings that compensation is likely required to increase production of ecosystem services on grasslands. Additional findings provide insights regarding rancher attitudes and opinions towards conservation policy and ecosystem services.

Keri Jacobs, Assistant Professor and Cooperatives Extension Specialist Department of Economics Iowa State University

Consolidation among agricultural co-operatives in the United States is a well-documented trend. A number of factors have contributed to this recently, including the desire for efficiency gains, growing capital requirements, and the preservation of producers’ collective bargaining power. This presentation documents the trend in consolidation, analyzes recent cases for evidence of efficiency effects, and provides evidence about the relationship between market prices for grain and consolidation over time.

 

Keri holds the Iowa Institute for Cooperatives Economics Professorship at Iowa State University. She has a BA in economics and business administration from Coe College and a PhD in economics from North Carolina State University. The majority of her teaching, research, and extension work relates to co-operatives. Topics of interest include farm-level production decisions, conservation and land use policies, and the financial and equity conditions of agricultural co-ops. She also provides training and education to co-op boards and management, developing content based on applied research.

 

Devin Serfas, M.Sc. Candidate, Agricultural and Resource Economics

With the increase in soybean adoption in western Canada, the decision to invest in a breeding program privately and publicly is becoming increasingly important to farmers. However, the decision to publicly invest is not only contingent on the economic surplus realized from research and development, but also the crowding effects public involvement may have on private investment. In this thesis, a two-stage dynamic game for investment in soybean breeding examines the crowding effects public investment may have on the private market. Players in the game include the Saskatchewan Pulse Growers (SPG) and private soybean seed companies in western Canada. This is followed by a simulation that aims to quantify the effects of entry in soybean breeding. Preliminary results suggest increased competition in soybean breeding benefits farmers and stimulates private investment when SPG raises the current level of seed technology.

Alistair Campbell, M.Sc. Candidate

Business risk management (BRM) programs can help reduce the risk inherent in the agricultural industry that is associated with income variability. These programs are commonly in the form of insurance (yield insurance, net margin insurance, etc.). There is a vast literature on investment decision under risk and uncertainty, but there exists a gap in empirical analysis of the risk-reducing effect BRM programs have on investment. This project examines the relationship between Canadian BRM programs, specifically AgriStability/CAIS and production insurance, and on-farm capital investment. This is done using theory and empirical analysis under a risk-balancing framework put forward by Gabriel and Baker (1980). Previous papers have researched BRM programs using the risk-balancing approach, but do not separate investment from other factors that influence the level of financial risk (Uzea et al. 2014; de Mey et al. 2014). Analysis on repeated cross-sectional data from the Farm Financial Survey is conducted. Results show that there exists a significant and positive correlation between Canadian BRM programs and the decision to invest. Results also show that BRM program participation is positively correlated with higher levels of financial risk, consistent with the risk balancing theory, as well as findings by Uzea et al. (2014). Understanding the effects of BRM programs on investment is important for designing and directing Canadian agricultural policy, with implications for technology adoption and long-term farm productivity.

Dr. Chad Lawley
Associate Professor, Agribusiness & Agricultural Economics
University of Manitoba
An underlying issue in discussions of farmland ownership restrictions is their impact on farmland values and on land acquisition costs for local farmers. In this article, I examine the farmland value consequences of relaxing a particularly stringent farmland ownership restriction in the Canadian province of Saskatchewan. The Saskatchewan Farm Security Act was introduced in 1974 and prohibited non-Saskatchewan residents and corporations from owning Saskatchewan farmland. In 2003, the Act was amended to allow Canadian residents and Canadian corporations to acquire farmland, bringing Saskatchewan in line with neighboring provinces and states that restrict foreign ownership but are open to domestic ownership. I estimate the impact of the 2003 amendment on Saskatchewan farmland values using 1995 through 2010 parcel-level farmland transactions in Saskatchewan and its neighboring province of Manitoba. The impact of the 2003 amendment is assessed in a series of econometric models that use differential trends in farmland prices in the two provinces before and after the amendment. I find that the 2003 amendment led to a 1.9 to 3.1% per year increase in Saskatchewan farmland values.

Modern farm machinery captures geocoded data on all aspects of a farming operation. These detailed datasets are called big data. Although some of this data is useful to individual farmers, much of it has little value to the farmer that collects it. Capturing the true value of big data comes when it is aggregated over many farms, allowing researchers to find underlying trends.

To analyze farmers’ willingness to share data we conduct a hypothetical choice experiment that asked farmers in Saskatchewan whether they would join a big data program. The choice tasks varied the type of organization that operated the big data program, and included financial and non-financial incentives. Heteroscedastic and random effects probit models are presented using data from a survey constructed for this study. The results are consistent across models and find that farmers are most willing to share their data with university researchers, followed by crop input suppliers or grower associations, and financial institutions or equipment manufacturers. Farmers are least willing to share their data with government. Farmers are more willing to share data in the presence of a financial incentive or non-financial incentive such as comparative benchmark statistics or prescription maps generated from the data submitted.

Many recreational fisheries are managed under regulated open access governed by seasonal closures and bag limits. This approach has often promoted a “race to the fish” with cascades of shorter seasons and shrinking bag limits. These effects have been particularly conspicuous in the Gulf of Mexico (GOM) red snapper fishery, where season lengths have fallen to weeks or even days per year. This paper uses data on recreation demand for for-hire offshore fishing trips in the GOM to understand the welfare implications of status-quo management. We estimate a travel cost demand model that focus on intertemporal substitution and incorporate a flexible, individualized approach to measuring how people value their leisure time. We find substantial improvements in angler welfare in moving towards a more efficient and flexible approach – such as a catch share system.