Cooperatives and Contracting in Agriculture: The Case of West Liberty Foods, October 2005

The West Liberty Foods turkey cooperative was formed in 1996 to purchase the assets and assume operations of Louis Rich Foods (an investor-owned processing rm), which, at the time, announced the imminent shutdown of its West Liberty, Iowa, processing facility. We study the creation and performance of this �new generation� cooperative using eld interviews with grower members and company management. We describe changes, before and after the buyout, in the contractual apparatus used for procuring live turkeys, and in the communication requirements, work expectations, and nancial positions of growers. During the private ownership period, most of the inputs (except labor and facilities) were provided by the rm; there was substantial supervision of the growers' actions; growers faced little price and production risk; and growers' equity was due largely to ownership of land and other farm assets. Our interviews reveal that, after cooperative formation, growers were exposed to considerable additional risk; monitoring of growers by the rm was less intensive; grower time and effort commitments to turkey production increased substantially; and a signicant fraction of rm (cooperative) equity came from growers' willingness to leverage their farm and personal assets (and hence indirectly their existing relationships with local lenders). We argue that some of these changes are consistent with a nancial contract where asset pledging and its corollary risk generate higher work effort by growers and a reduction in agency rents. These economies likely compensate for an organizational deadweight loss traditionally associated with cooperative governance.

Ag Online, January 22, 2002

Monthly newsletter for the College of Agricultural for Iowa State University

EU Enlargement and Technology Transfer to New Member States, November 2005

The European Union (EU) accomplished its biggest enlargement process in 2004 in terms of the number of countries, area, and population. This study focuses on the impact of enlargement, the resulting technology transfer on the grain sectors of the New Member States (NMS), and the consequent welfare implications. The study finds that EU enlargement has important implications for the EU and the NMS, but its impact on the world grain markets is minimal. The results show that producers in the NMS gain from accession because of higher prices, whereas consumers in most NMS face a welfare loss. Incorporating technology transfer into the accession increases the welfare gain of producers despite falling prices because of the larger supply shift. The loss of welfare for consumers in most NMS is lower in this case because of the decline in grain prices.

Final Report for the Iowa Livestock Industry Waste Characterization and Methane Recovery Information Dissemination Project, 2003

The Iowa livestock industry generates large quantities of manure and other organic residues; composed of feces, urine, bedding material, waste feed, dilution water, and mortalities. Often viewed as a waste material, little has been done to characterize and determine the usefulness of this resource. The Iowa Department of Natural Resources initiated the process to assess in detail the manure resource and the potential utilization of this resource through anaerobic digestion coupled with energy recovery. Many of the pieces required to assess the manure resource already exist, albeit in disparate forms and locations. This study began by interpreting and integrating existing Federal, State, ISU studies, and other sources of livestock numbers, housing, and management information. With these data, models were analyzed to determine energy production and economic feasibility of energy recovery using anaerobic digestion facilities on livestock faxms. Having these data individual facilities and clusters that appear economically feasible can be identified specifically through the use of a GIs system for further investigation. Also livestock facilities and clusters of facilities with high methane recovery potential can be the focus of targeted educational programs through Cooperative Extension network and other outreach networks, providing a more intensive counterpoint to broadly based educational efforts.

Soil and Water Conservation; Conservation Program Summary, 2002

Report of Conservation Program Summary produced by Iowa Departmment of Agriculture and Land Stewardship

Integrated Farm/Livestock Management Demonstration Program, 2004

Farm/Livestock Management Demonstration Program produced by Iowa Departmment of Agriculture and Land Stewardship

Integrated Farm/Livestock Management Demonstration Program, 2001

Farm/Livestock Management Demonstration Program produced by Iowa Departmment of Agriculture and Land Stewardship

Integrated Farm/Livestock Management Demonstration Program, 2003

Farm/Livestock Management Demonstration Program produced by Iowa Departmment of Agriculture and Land Stewardship

Collective Marketing Arrangements for Geographically Differentiated Agricultural Products: Welfare Impacts and Policy Implications, May 2006

This paper examines the incentive of atomistic agricultural producers within a specific geographical region to differentiate and collectively market products. We develop a model that allows us to analyze the market and welfare effects of the main types of real-world producer organizations, using it to derive economic insights regarding the circumstances under which these organizations will evolve, and describing implications of the results obtained in the context of an ongoing debate between the European Union and United States. As the anticipated fixed costs of development and marketing increase and the anticipated size of the market falls, it becomes essential to increase the ability of the producer organization to control supply in order to ensure the coverage of fixed costs. Whenever a collective organization allows a market (with a new product) to exist that otherwise would not have existed there is an increase in societal welfare. Counterintuitively, stronger property right protection for producer organizations may be welfare enhancing even after a differentiated product has been developed. The reason for this somewhat paradoxical result is that legislation aimed at curtailing the market power of producer organizations may induce large technological distortions.

Concepts and Rationale for Regional Nitrogen Rate Guidelines for Corn, April 2006

Nitrogen (N) is typically one of the largest corn fertilization expenses. Nitrogen application is critical because it signifi cantly improves corn yield in many crop rotations. When choosing N rates, producers need to carefully consider both achieving most profi table economic return and advancing environmental stewardship. In 2004, university agronomists from the Corn Belt states began discussions regarding N rate use for corn production. The reasons for the discussions centered on apparent differences in methods for determining N rates across states, misperceptions regarding N rate guidelines, and concerns about application rates as corn yields have climbed to historic levels. An outcome of those discussions was an effort with the objectives to: ▪ develop N rate guidelines that could be applicable on a regional basis and ▪ identify the most profi table fertilizer N rates for corn production across the Corn Belt. This publication provides an overview of corn N fertilization in regard to rate of application, investigates concepts for determining economic application rates, and describes a suggested regional approach for developing corn N rate guidelines directly from recent research data.

Global Prospects for Dairy in Argentina and Chile: Evidence from Field Visits and Model Simulations, August 2006

We assess the international competitiveness of the dairy industries in Argentina and Chile, combining recent market intelligence gathered from field visits with quantitative simulations of global policy reform scenarios. Both countries exhibit strong potential for export growth but face significant internal and external barriers to expanding their dairy industries. Global policy reforms would resolve some of the international obstacles to their expansion. Argentina has great potential, but it is handicapped by its current macroeconomic policies, trade policy distortions, and the uncertainty associated with policy implementation. Chile is more limited in terms of natural capacity for expansion, but it has a positive trade and investment environment.

Economies of Feedlot Scale, Biosecurity, Investment, and Endemic Livestock Disease, September 2006

Infectious livestock disease creates externalities for proximate animal production enterprises. The distribution of production scale within a region should influence and be influenced by these disease externalities. Taking the distribution of the unit costs of stocking an animal as primitive, we show that an increase in the variance of these unit costs reduces consumer surplus. The effect on producer surplus, total surplus, and animal concentration across feedlots depends on the demand elasticity. A subsidy to smaller herds can reduce social welfare and immiserize the farm sector by increasing the extent of disease. While Nash behavior involves excessive stocking, disease effects can be such that aggregate output declines relative to first-best. Disease externalities can induce more adoption of a cost-reducing technology by larger herds so that animals become more concentrated across herds. For strategic reasons, excess overall adoption of the innovation may occur. Larger herds are also more likely to adopt biosecurity innovations, explaining why larger herds may be less diseased in equilibrium.

Little Dairy on the Prairie: from butter makin' to high-tech agriculture, 2005

In 2001, extensive archaeological excavations were conducted at the Oneida Cheese Factory in Jones County. The county is a microcosm of larger dairying trends found throughout northeast Iowa, the state’s premier dairy-producing region. Jones County moved from homemade cheese and butter production by farm women, to the industrialization of the dairy farm and opening of cheese factories and butter creameries. A number of innovations affected the industry around the turn-of-the-twentieth century, including reliable butterfat testing, the introduction of ensilage (silos) that created yearround milk production, and consolidation of the many local creameries into larger creamery organizations, such as the Diamond Creamery run by Henry D. Sherman of Jones County. Iowa’s dairy industry of today looks very different from its heritage: consolidation and competition have drastically reduced the number of cows, dairy farms, and processing plants. In recent years, northeast Iowa has become the center of a movement to revitalize Iowa’s dairy industry, particularly through the use of value-added strategies, such as niche markets and large regional co-operatives: the lessons from Iowa’s dairying legacy are resurfacing as a solution to modern agricultural challenges.

An Analysis of the Link between Ethanol, Energy, and Crop Markets, November 2006

This study analyzes the impact of price shocks in three input and output markets critical to ethanol: gasoline, corn, and sugar. We investigate the impact of these shocks on ethanol and related agricultural markets in the United States and Brazil. We find that the composition of a country’s vehicle fleet determines the direction of the response of ethanol consumption to changes in the gasoline price. We also find that a change in feedstock costs affects the profitability of ethanol producers and the domestic ethanol price. In Brazil, where two commodities compete for sugarcane, changes in the sugar market affect the competing ethanol market.

International Update, November/December 2006

News from the Iowa International Office