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This paper expands the contributions of Goodwin and Holt (AJAE, 1999) and Goodwin and Harper (J. of Ag. and Appl. Econ., 2000), GHH henceforth, who analyze retail-wholesale-farm price transmissions in the U.S. beef and pork industries using weekly data. First, in light of advancements in unit root tests, we re-examine in a more comprehensive manner GHH’s conclusion that the weekly U.S. cattle/beef and hog/pork price series are nonstationary. The conventional augmented Dickey-Fuller test that GHH adopt has low power in discriminating against the unit root null because it does not entertain the possibility of a structure break in the deterministic trend function. Second, we examine more closely the estimation procedure surrounding the long run price linkage equation, ensuring the unbiasedness in the estimated long run price transmission coefficient. Moreover, we ascertain whether there have been structural changes in the long run price linkage equation using a new approach, which endogenously estimates the break date. Third, we employ two data sets with different frequencies, weekly data and monthly data, to gain insight into the reasons underlying price asymmetry found in GHH.

The purpose of this paper is to investigate the threshold effect of the U.S. generic fluid milk and cheese advertising programs. A threshold delineates the level of advertising intensity that has to be met to generate a specific level of sales effect. Given that promotional organizations face budget constraints, it is of particular interest to ascertain if there exists a minimum threshold that an advertising campaign has to overcome to yield a non-trivial sales effect. To the best of our knowledge, there is no study focusing on the threshold effects of generic advertising of agricultural products. The estimation results confirm that, for both fluid milk and cheese advertisings, there exist three thresholds which partition the quarterly observations between 1975 and 2004 into four possible regimes depending on the level of advertising intensity in each period. The generic fluid milk advertising goodwill coefficient is found to be relatively small for the regime with the lowest advertising intensity, building up to a higher level as the regime progresses, but eventually drops to lower levels as the intensity continues to grow, reflecting the eventual arrival of the diminishing returns of advertising. The pattern of initial build up, however, is not detected in the cheese equation in which the estimated goodwill parameter starts at a rather large magnitude in the first regime, but declines monotonically and drastically in the second and third regimes, only to become statistically not different from zero in the fourth regime. To evaluate the performance of the National Dairy Board (NDB) programs over time, the estimated demand equations are used to simulate the effect on sales of a change in the fluid milk and cheese advertising expenditure paths, focusing on the first ten years and the second ten years of the NDB’s operation since 1984. While an increase in advertising expenditures has the effect of increasing sales (holding regime configuration constant), it is found that this scale effect of additional advertising may be outweighed by the negative effect of a downward shift in the goodwill coefficient arising from regime change. In other words, sales can be made lower as the result of increased advertising, a feature not supported by the conventional model of no threshold. Indeed, in the cheese case advertising elasticity is found to be negative when evaluated at some levels larger than the historical pattern. Compared to the result pertaining to the first ten years, the benefit-cost ratio of the fluid milk program suggests that the NDB has moved its fluid milk operation scale closer to optimal during the second ten years. The optimal fluid milk advertising expenditure level for the second ten years is found to be between 105 and 110 percent of the historical level. This paper will contribute to the discussion among researchers, program managers, and industry participants on the importance of entertaining the threshold effect of advertising when examining program effectiveness and the optimal allocation of program dollars. Researchers need to be aware of the potential pitfalls of their conventional econometric estimates (and, hence, the limitations of their policy suggestions) when the true model is of threshold type. Program managers have argued that advertising effectiveness may vary, depending on the intensity of their campaigns and have long sought this information in their spending allocation decisions. The insights provided in this paper will enhance our understanding of the threshold effect of advertising.

The extent to which Latin America can pull itself out of persistent poverty in the foreseeable future depends, in an important manner, on how successful the region will be in achieving sustainable growth in its rural economies. A good strategy for sustainable growth in rural Latin America is to make sure that the market works for the poor. The purpose of this paper is twofold. First, it is to lay out some of the issues important to the successful functioning of the key markets in rural Latin America, including labor market, financial market, land market, and agricultural factor and product markets. Second, it is to present policy suggestions regarding how to ensure that the market works for the rural poor. While governments should continue their refrains of not intervening directly with the market and distorting price signals, they can play a very positive role in facilitating market reforms and in ensuring that the rural poor indeed emerge as winners.

This paper examines the effect of generic pork promotion within a meat demand system framework. Special focus has been placed on the separation of demand effect of advertising from that of health-related information on product attributes.

This paper empirically investigates the relationship between commodity prices and wages in the rural labor markets of a developing country (i.e., Bangladesh). Given its basis on a theoretical justification for hysteresis, this empirical study provides a more complete method for investigating labor market hysteresis than previous research.

The U.S. pork sector is evolving from an industry of small, independent firms vertically linked by spot markets to one of substantially larger firms vertically connected through contractual agreements and integration. Potential benefits to this tighter vertical arrangement include lower consumer pork prices, although the true nature of this benefit is still under debate. At the same time, there is concern of market foreclosure because highly vertically integrated industry may prevent independent hog producers from having access to open markets in which to sell their output. The objective of this paper is to develop an econometric model to estimate the extent of backward integration by pork processing firms into the upstream hog production stage, taking into account the oligopsonistic nature of the processors, and to simulate the effect of vertical integration on consumer and producer prices and welfare.

The U.S. pork sector is evolving from an industry of small, independent firms vertically linked by spot markets to one of substantially larger firms vertically connected through contractual agreements and integration. Potential benefits to this tighter vertical arrangement include lower consumer pork prices, although the true nature of this benefit is still under debate. At the same time, there is concern of market foreclosure because highly vertically integrated industry may prevent independent hog producers from having access to open markets in which to sell their output. Boehlje underscores the need for empirical answers to questions related to the above structural change in the pork industry. The objective of this paper is to estimate econometrically the extent of backward integration by pork processing firms into the upstream hog production stage, taking into account the oligopsonistic nature of the processors, and to simulate the effect of vertical integration on consumer and producer prices and welfare. Following Perry, backward integration is defined as the fraction of the upstream limiting production factor (e.g., farm land, feedlot facilities and water supply) that the downstream processors own. This economic measure of vertical integration is richer than the traditional measure which is a ratio of internal intermediate input production (by the upstream subsidiary) to the total intermediate input usage (by the downstream processor). Rather than an economic measure of backward integration, this accounting ratio reflects the resolution of vertical integration and, by itself alone, does not give insight into the price and welfare effects of the structural change. The procedure of this study is as follows. An individual processor's profit maximization problem consists of maximizing revenue from a variety of pork products and minimizing the hog input expenditures, where the latter sub-problem involves a division of the total hog input procurements between open market purchases and internal production by the upstream subsidiary. From the optimization, one derives the optimal pork output supply, total hog input demand, and open market hog input purchases. These behavioral equations of the individual processor are aggregated and estimated in conjunction with the pork product demand equations of consumers and the open market hog supply equation of independent hog producers. The aggregate model is then used as a basis for simulating price and welfare effects of vertical integration. Possible estimation problems arising from the complexity of the optimal solutions are anticipated and coping strategies devised. In addition, data are unavailable on open market hog quantities; as a result theoretical restrictions derived from the model are used to transform this variable so as to utilize the slaughter data published by the USDA.

This study estimates a hedonic price equation to assess consumers' willingness-to-pay for reduction in pesticide residues in fifteen fruits and vegetables. A unique feature of the study is its employment of the FDA's Total Diet Study data which attempts to measure actual pesticide ingestion by the American public in table-ready or prepared foods. The results indicate that consumers would be willing to pay approximately $.08 per pound to reduce pesticeds by one part per million in the prepared fruits and vegetables that they consume.

An econometric framework for estimating a two-regime dairy structural system is presented. Failure to account for switching between regimes due to government price intervention raises the problem of selectivity bias. Further, since a structural system of equations is involved, the problem is not limited to the market associated with the intervention. Rather, bias from a single source can distort all equations in the system. The ramifications of not correcting for the bias in policy analyses are investigated.