Influence of the Premium Subsidy on Farmers’ Crop Insurance Coverage Decisions, April 2005

The Agricultural Risk Protection Act greatly increased the expected marginal net benefit of farmers buying high-coverage crop insurance policies by coupling premium subsidies to coverage level. This policy change, combined with cross-sectional variations in expected marginal net benefits of high-coverage policies, is used to estimate the role that premium subsidies play in farmers’ crop insurance decisions. We use county data for corn, soybeans, and wheat to estimate regression equations that are then used to obtain insight into two policy scenarios. We first estimate that eventual adoption of actuarially fair incremental premiums, combined with current coupled subsidies, would increase farmers’ purchase of high-coverage policies by almost 400 percent from 1998 levels across the three crops and two plans of insurance included in the analysis. We then estimate that a return to decoupled subsidies would decrease farmers’ high-coverage purchase decisions by an average of 36 percent.

Farm-Level Analysis of Risk Management Proposals, March 2000

This paper presents a detailed report of the representative farm analysis (summarized in FAPRI Policy Working Paper #01-00). At the request of several members of the Committee on Agriculture, Nutrition, and Forestry of the U.S. Senate, we have continued to analyze the impacts of the Farmers’ Risk Management Act of 1999 (S. 1666) and the Risk Management for the 21st Century Act (S. 1580). Earlier analysis reported in FAPRI Policy Working Paper #04-99 concentrated on the aggregate net farm income and government outlay impacts. The representative farm analysis is conducted for several types of farms, including both irrigated and non-irrigated cotton farms in Tom Green County, Texas; dryland wheat farms in Morton County, North Dakota and Sumner County, Kansas; and a corn farm in Webster County, Iowa. We consider additional factors that may shed light on the differential impacts of the two plans. 1. Farm-level income impacts under alternative weather scenarios. 2. Additional indirect impacts, such as a change in ability to obtain financing. 3. Implications of within-year price shocks. Our results indicate that farmers who buy crop insurance will increase their coverage levels under S. 1580. Farmers with high yield risk find that the 65 percent coverage level maximizes expected returns, but some who feel that they obtain other benefits from higher coverage will find that the S. 1580 subsidy schedule significantly lowers the cost of obtaining the additional coverage. Farmers with lower yield risk find that the increased indemnities from additional coverage will more than offset the increase in producer premium. In addition, because S. 1580 extends its increased premium subsidy percentages to revenue insurance products, farmers will have an increased incentive to buy revenue insurance. Differences in the ancillary benefits from crop insurance under the baseline and S. 1580 would be driven by the increase in insurance participation and buy-up. Given the same levels of insurance participation and buy-up, the ancillary benefits under the two scenarios would be the same.

Production of renewable polymers from crop plants

Plants produce a range of biopolymers for purposes such as maintenance of structural integrity, carbon storage, and defense against pathogens and desiccation. Several of these natural polymers are used by humans as food and materials, and increasingly as an energy carrier. In this review, we focus on plant biopolymers that are used as materials in bulk applications, such as plastics and elastomers, in the context of depleting resources and climate change, and consider technical and scientific bottlenecks in the production of novel or improved materials in transgenic or alternative crop plants. The biopolymers discussed are natural rubber and several polymers that are not naturally produced in plants, such as polyhydroxyalkanoates, fibrous proteins and poly-amino acids. In addition, monomers or precursors for the chemical synthesis of biopolymers, such as 4-hydroxybenzoate, itaconic acid, fructose and sorbitol, are discussed briefly

How Much “Safety” Is Available under the U.S. Proposal to the WTO?, November 2005

Critics of the U.S. proposal to the World Trade Organization (WTO) made in October 2005 are correct when they argue that adoption of the proposal would significantly reduce available support under the current farm program structure. Using historical prices and yields from 1980 to 2004, we estimate that loan rates would have to drop by 9 percent and target prices would have to drop by 10 percent in order to meet the proposed aggregate Amber Box and Blue Box limits. While this finding should cheer those who think that reform of U.S. farm programs is long overdue, it alarms those who want to maintain a strong safety net for U.S. agriculture. The dilemma of needing to reform farm programs while maintaining a strong safety net could be resolved by redesigning programs so that they target revenue rather than price. Building on a base of 70 percent Green Box income insurance, a program that provides a crop-specific revenue guarantee equal to 98 percent of the product of the current effective target price and expected county yield would fit into the proposed aggregate Amber and Blue Box limits. Payments would be triggered whenever the product of the season-average price and county average yield fell below this 98 percent revenue guarantee. Adding the proposed crop-specific constraints lowers the coverage level to 95 percent. Moving from programs that target price to ones that target revenue would eliminate the rationale for ad hoc disaster payments. Program payments would automatically arrive whenever significant crop losses or economic losses caused by low prices occurred. Also, much of the need for the complicated mechanism (the Standard Reinsurance Agreement) that transfers most risk of the U.S. crop insurance to the federal government would be eliminated because the federal government would directly assume the risk through farm programs. Changing the focus of federal farm programs from price targeting to revenue targeting would not be easy. Farmers have long relied on price supports and the knowledge that crop losses are often adequately covered by heavily subsidized crop insurance or by ad hoc disaster payments. Farmers and their leaders would only be willing to support a change to revenue targeting if they see that the current system is untenable in an era of tight federal budgets and WTO limits.

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.

Woodland Improvement and Crop Trees in Iowa, 2005

Vigorous and Healthy woodlands in Iowa have the unique distinction of being able to provide a wealth of benefits for the landowner and residents of the state. Benefits from a healthy forest include timber and wood resources, watershed protection, fragile site protection, wildlife and bird habitat, aesthetics and beauty, and recreational opportunities.

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.

Intellectual Property Rights and Crop-Improving R&D under Adaptive Destruction, June 2007

This paper studies how the strength of intellectual property rights (IPRs) affects investments in biological innovations when the value of an innovation is stochastically reduced to zero because of the evolution of pest resistance. We frame the problem as a research and development (R&D) investment game in a duopoly model of sequential innovation. We characterize the incentives to invest in R&D under two competing IPR regimes, which differ in their treatment of the follow-on innovations that become necessary because of pest adaptation. Depending on the magnitude of the R&D cost, ex ante firms might prefer an intellectual property regime with or without a “research exemption” provision. The study of the welfare function that also accounts for benefit spillovers to consumers—which is possible analytically under some parametric conditions, and numerically otherwise—shows that the ranking of the two IPR regimes depends critically on the extent of the R&D cost.

Impact of High Crop Prices on Environmental Quality: A Case of Iowa and the Conservation Reserve Program, 2007

Growing demand for corn due to the expansion of ethanol has increased concerns that environmentally sensitive lands retired from agricultural production into the Conservation Reserve Program (CRP) will be cropped again. Iowa produces more ethanol than any other state in the United States, and it also produces the most corn. Thus, an examination of the impacts of higher crop prices on CRP land in Iowa can give insight into what we might expect nationally in the years ahead if crop prices remain high. We construct CRP land supply curves for various corn prices and then estimate the environmental impacts of cropping CRP land through the Environmental Policy Integrated Climate (EPIC) model. EPIC provides edge-of-field estimates of soil erosion, nutrient loss, and carbon sequestration. We find that incremental impacts increase dramatically as higher corn prices bring into production more and more environmentally fragile land. Maintaining current levels of environmental quality will require substantially higher spending levels. Even allowing for the cost savings that would accrue as CRP land leaves the program, a change in targeting strategies will likely be required to ensure that the most sensitive land does not leave the program.

Speculation, risk premia and expectations in the yield curve

An affine asset pricing model in which traders have rational but heterogeneous expectations aboutfuture asset prices is developed. We use the framework to analyze the term structure of interestrates and to perform a novel three-way decomposition of bond yields into (i) average expectationsabout short rates (ii) common risk premia and (iii) a speculative component due to heterogeneousexpectations about the resale value of a bond. The speculative term is orthogonal to public informationin real time and therefore statistically distinct from common risk premia. Empirically wefind that the speculative component is quantitatively important accounting for up to a percentagepoint of yields, even in the low yield environment of the last decade. Furthermore, allowing for aspeculative component in bond yields results in estimates of historical risk premia that are morevolatile than suggested by standard Affine Gaussian term structure models which our frameworknests.

Comparação dos sistemas de cultivo nativo e adensado de erva mate, Ilex paraguariensis St. Hil., quanto à ocorrência e flutuação populacional de insetos

This research was carried out in order to compare the occurrence of insects in two maté cultivation systems, native and high tree density. It was performed from August/2000 to September/2001, in a private property in São Mateus do Sul county, in Paraná State, Brazil. Visual inspections of trees and light traps were used to evaluate insect populations in both areas. For Hedypathes betulinus (Klug) (Coleoptera, Cerambycidae), only six adults were observed in the dense area. Based on presence of sawdust at the basis of the trunk, it was obtained that the number of attacked trees did not surpass 11% in either area. For Gyropsylla spegazziniana (Lizer y Trelles) (Hemiptera, Psyllidae), the number of galls per tree was counted and it was observed that the population peak occurred from November to January. For Hylesia spp. (Lepidoptera, Saturniidae) and Thelosia camina Schaus (Lepidoptera, Eupterotidae), the presence of caterpillars on the trees was noticed from September to February, with the population peak in November and December. Adults of Hylesia spp. were more numerous in February and March. Two species that were not previously recorded for Brazil on maté were identified: Hylesia paulex Dognin (83%) and Hylesia remex Dyer (17%), collected with light traps. The maté caterpillar, T. camina was not collected with these traps. Nymphs and adults of Ceroplastes grandis Hempel (Hemiptera, Coccidae) were observed along the year on the branches, with population peak between April and June for the nymphs and from September to November for the adults. It should be considered that despite higher insect incidence in the dense area compared to the native area, the first presents higher yield, and that with a good pest management program the insect problems can be minimized.

The role of mycorrhizas in more sustainable oil palm cultivation

Oil palm is a significant and developing crop in many developing countries. The introduction of oil palm puts pressure on natural resources because it is often planted in cleared-cut land that previously supported other crops or was forested. This has led to environmental concerns which require attention. Hence it is important that new plantations are managed in a sustainable way to reduce the impact of oil palm cultivation on ecosystems whilst maximising yield and productivity to farmers. The application of arbuscular mycorrhizal fungi (AMF) technology is one option that can benefit both agronomic plant health and ecosystems. AMF have the potential to increase conventional agricultural productivity and are crucial for the sustainable functioning of agricultural ecosystems. This paper provides an insight into how AMF application might benefit oil palm cultivation through more sustainable management and the practical use of AMF for oil palm plantations.

BIOMOD - a platform for ensemble forecasting of species distributions

BIOMOD is a computer platform for ensemble forecasting of species distributions, enabling the treatment of a range of methodological uncertainties in models and the examination of species-environment relationships. BIOMOD includes the ability to model species distributions with several techniques, test models with a wide range of approaches, project species distributions into different environmental conditions (e.g. climate or land use change scenarios) and dispersal functions. It allows assessing species temporal turnover, plot species response curves, and test the strength of species interactions with predictor variables. BIOMOD is implemented in R and is a freeware, open source, package

Forecasting and turning point predictions in a Bayesian panel VAR model

We provide methods for forecasting variables and predicting turning points in panel Bayesian VARs. We specify a flexible model which accounts for both interdependencies in the cross section and time variations in the parameters. Posterior distributions for the parameters are obtained for a particular type of diffuse, for Minnesota-type and for hierarchical priors. Formulas for multistep, multiunit point and average forecasts are provided. An application to the problem of forecasting the growth rate of output and of predicting turning points in the G-7 illustrates the approach. A comparison with alternative forecasting methods is also provided.