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To reach the US 2022 mandate of 136.3 billion litres of annual biofuel production, multiple sources must be integrated into the renewable biofuels supply chain. Energy cane appears well suited to help meet this mandate, particularly in Louisiana. Although not traditionally grown, production similarities to sugarcane make it an attractive option for Louisiana farmers if they are offered the ‘right price.’ If farmers are to switch hectares from sugarcane to energy cane, cellulosic ethanol processors must provide farmers an additional $2.84/MT and $3.41/MT on a third and fourth stubbling above breakeven to make the net revenue on a per tonne basis from energy cane equal to that of sugarcane. Providing farmers with the right monetary incentive is only part of the equation for ethanol processors, as they also need to determine if cellulosic ethanol from energy cane is competitive with corn ethanol. A breakeven analysis is utilized to determine the monetary incentive needed to cover the cost of production. An additional equation is used to evaluate the cost of cellulosic ethanol so that comparisons may be drawn between cellulosic costs and traditional corn ethanol costs. Our results indicate that this occurs at enzyme prices of $0.04/l (projected enzyme costs), irrespective of energy cane yields, stubbling length, and/or corn prices. Since 2007, enzyme costs for the lignocellulosic ethanol process have fallen by $0.07/l, which have increased the competitiveness of cellulosic ethanol relative to corn ethanol.

During the financial downturn of 2008, asset classes that investors traditionally found to have low correlation with U.S. stocks became more highly correlated at the most inopportune time. Post-downturn, investors increasingly looked for alternative assets that offer diversification benefits, one of which being farmland. One of the challenges of investing in farmland is that the asset is not a securitized, low-cost investment. The current research investigates the whether exposure to farmland via an index of agribusiness stocks provides significant diversification benefits. We estimated the dependence between daily returns of the S&P 500 and an index of agribusiness stocks from 1970 through 2008 using copulas. We find significant evidence that agribusiness stocks have strong lower tail dependence with large U.S. stocks and are actually less correlated in the upper tail of the distribution. Meaning, the agribusiness index moves in near lockstep with U.S. stocks in downturns and more independently in large upswings. This provides little evidence to support the investment strategy of purchasing agribusiness stocks broadly to gain exposure to farmland.

To reach the US 2022 mandate of 136.3 billion litres of annual biofuel production, multiple sources must be integrated into the renewable biofuels supply chain. Energy cane appears well suited to help meet this mandate, particularly in Louisiana. Although not traditionally grown, production similarities to sugarcane make it an attractive option for Louisiana farmers if they are offered the ‘right price.’ If farmers are to switch hectares from sugarcane to energy cane, cellulosic ethanol processors must provide farmers an additional $2.84/MT and $3.41/MT on a third and fourth stubbling above breakeven to make the net revenue on a per tonne basis from energy cane equal to that of sugarcane. Providing farmers with the right monetary incentive is only part of the equation for ethanol processors, as they also need to determine if cellulosic ethanol from energy cane is competitive with corn ethanol. A breakeven analysis is utilized to determine the monetary incentive needed to cover the cost of production. An additional equation is used to evaluate the cost of cellulosic ethanol so that comparisons may be drawn between cellulosic costs and traditional corn ethanol costs. Our results indicate that this occurs at enzyme prices of $0.04/l (projected enzyme costs), irrespective of energy cane yields, stubbling length, and/or corn prices. Since 2007, enzyme costs for the lignocellulosic ethanol process have fallen by $0.07/l, which have increased the competitiveness of cellulosic ethanol relative to corn ethanol.

This paper examines two interrelated issues in commodity markets, namely, the cyclical relationship between stocks and commodities and the function of commodity and agribusiness indexes in portfolios. A high negative correlation has existed between stock and commodity prices over the past 140 years. Moreover, the two markets have alternated in price leadership with 29–32-year cycles. The recent price dominance in agricultural commodities started in 2000, a result supported by the empirical results of the portfolio allocation analysis. For a risk-averse investor, irrespective of the period analyzed, placing funds in agribusiness and/or agricultural commodity indexes was sound investing.

On March 7, 2012, ABC News aired a report on the use of lean, finely textured beef (LFTB), or “pink slime” as its reporters dubbed it. Although this was not the first time LFTB had been the subject of negative criticism on a national scale, the attention is no longer just coming from traditional media outlets (television, radio, and newspaper), but also from social media sources (Facebook, blogs, and Twitter). Of particular importance is the influence this reaction has had on the financial performance of agribusiness firms in the food supply chain. If image is everything and perception is reality, particularly as it relates to food safety, then agribusiness firms might be in for some challenges. Food and agribusiness firms will need to be prepared to react every time a food safety issue receives attention in social media irrespective of how these images and perceptions are generated.

This essay is one of 23 featured authors from around the world discussing the challenges and solutions to filling the global talent gap in agribusiness. www.ifama.org

In order to more fully study the risks and uncertainty involved in cellulosic ethanol production, we examine a simulated plant in South Louisiana using Real Options Analysis

The IFAMR is published by (IFAMA) the International Food and Agribusiness Management Review. www.ifama.org

The Oklahoma Agricultural Bank Simulation Game (Ag Bank Sim) is a software based, experiential learning tool through which participants historically have learned key financial, economic, and banking lessons. The game offers a “real world” experience in which management decisions affect institutions interacting in a geographic market, enhancing understanding of the complex, competitive environment within which commercial banks operate. A new Internet version of the game has been developed, allowing participants to play Ag Bank Sim in a virtual environment. This poster highlights features of the game and reports results of pre and post tests of undergraduate students playing the game at Louisiana State University and Oklahoma State University in the spring 2010 semester. Through playing Ag Bank Sim, participants improved understanding of key concepts. The Internet environment enhanced both the student and instructor experience.

The principal goal of this research is to determine why university students, part of the Millennial Generation, choose to purchase produce from a farmers market. Students who cook multiple meals and use produce in these meals at their place of residence are more likely to shop at a farmers market. In addition, Millennial-aged students who value their produce being organic are also more likely to shop at a farmers market. Agriculture majors do not find availability of organic produce important when deciding whether they want to shop at a farmers market. Students living on campus value convenience when deciding if they are going to shop a farmers market, given their transportation issues.

The Internet is becoming an increasingly important management tool in production agriculture. Using data from the 2004 Agricultural Resource Management Survey (ARMS) and a double-hurdle estimation approach, we explore the adoption of computers with Internet access by and Internet purchasing patterns of farm households. Adoption of the Internet is positively related to age and education of the operator, off-farm work, presence of spouse, participation in government programs, farm size, and regional location of the farm. Internet purchasing patterns of farm households are positively related to the education of the operator and spouse, presence of teenagers, and regional location of the farm. Finally, farm businesses and their households are more likely to purchase a greater percentage of non-durable goods through the Internet as distances to markets increase.

The efficient market hypothesis would suggest that stock prices incorporate the information revealed in the public process of creating legislation as the debate occurred. Thus, there should be no abnormal returns to agribusiness stocks on key legislative dates when drafting and altering the farm bill. Using an event study methodology, key legislative dates are tested for abnormal returns to firms that supply inputs to or process outputs of agricultural producers. Typically, agribusinesses react on the date legislation emerges from the joint House and Senate conference committee.

Product innovation for a juice company and its associated first-mover advantages are analyzed. Stochastic simulation is used to model market size, price, competitive intensity, and the likelihood of competitor entry. Results of moving first allow the firm to capture market share, realize first-mover advantages in excess of $2 million, and deter competitor innovation. In addition, the proposed model is flexible enough to be applied in other industries.

The dramatic changes occurring throughout the agriculture industry are creating new and different uncertainties that result from a turbulent business climate. The objective of this paper is to present a methodology to understand, assess and evaluate, and manage strategic uncertainty. The approach is to present a mental model that frames assessment of strategic uncertainty from a potential and exposure perspective. Scorecarding and heat mapping assessment tools operationalize the mental model. Participants in an executive agribusiness educational workshop applied this mental model and the assessment tools to one of three hypothetical seed companies. The participants then provided an evaluation of the usefulness and effectiveness of uncertainty scorecarding and heat mapping.

The accelerating speed of change in the food and agribusiness industries is resulting in more risk and uncertainty – the future is becoming much less predictable. The drivers of these uncertainties are also changing – strategic risk which generally has a low probability of occurrence, but large consequences has begun to replace tactical risk. Managing these risks requires not only new assessment tools such as scorecarding and mapping, but also more systematic decision frameworks. In essence, strategic risk management involves using the proper assessment and management tools so as to truncate the loss exposure and capture the profit potential of these risks.

Fresh Juice Inc. (FJI) is in the process of determining whether they should launch a new fruit juice in a market that has been relatively stagnant for the last 15 years. Management of FJI is faced with uncertainty surrounding market share, market size, price, and competitor entry. In addition, FJI has the ability to chose between alternative production processes; this choice directly affects the likelihood the investment will return a positive Net Present Value. This case teaches students how to develop a stochastic simulation models given limited information to analyze risk investment decisions

We develop testable hypotheses for utility maximization given risk averse producers based on a general specification of the utility function. This is a direct expansion of the model posed by Pope (1978). Empirical tests using production data with a translog specification indicate that utility maximization does not always hold.

The Department of Justice (DOJ) antitrust penalties have become harsher for violating individuals and firms, and the criminal enforcement of cases has become increasingly important during the last 20 years. In this study we investigate whether these changes in antitrust law led to improved effectiveness of antitrust actions with respect to price-fixing over 1981-2001. We measure effectiveness by suppressed stock market values of offending firms after successful Section 1 of the Sherman Act indictment, by duration of the deterrent effect and by the rate of recidivism. We use effectiveness of antitrust enforcement documented by Bosch and Eckard (1991) and Thompson and Kaserman (2001) for 1962-80 as a basis for comparison. Our results show that the changes in antitrust law do improve the effectiveness as measured by changes in market valuations of offenders, but the durability of deterrent effect and the rate of recidivism are left unaffected suggesting that Section 1 of Sherman Act enforcement has very little lasting effect.

Real options analysis integrates uncertain outcomes of investment decisions. This framework is used to analyze a new product launch from an agricultural business to a market with multiple uncertainties. Findings indicate a more accurate valuation of the investment when real options and their interactions with the investment are considered.

This research investigates the potential of investments in publicly traded value adding firms in the meat industry as a strategy for livestock producers to diversify risk and capture value-added profits, while allowing the producer to maintain management authority and minimize costs. The research determines the optimal portfolio of investments in up to 66 publicly traded value-added companies. The results indicate tat a portfolio consisting of livestock production and publicly traded value-added companies provides better returns at a lower risk than either a 100 percent investment in livestock production or a combination of livestock production and the S&P 500.