Source: MONTANA STATE UNIVERSITY submitted to
AGRICULTURAL FINANCE AND FARM AND RANCH MANAGEMENT
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
REVISED
Funding Source
Reporting Frequency
Annual
Accession No.
0134929
Grant No.
(N/A)
Project No.
MONB00098
Proposal No.
(N/A)
Multistate No.
(N/A)
Program Code
(N/A)
Project Start Date
Oct 1, 2009
Project End Date
Sep 30, 2014
Grant Year
(N/A)
Project Director
Atwood, J. A.
Recipient Organization
MONTANA STATE UNIVERSITY
(N/A)
BOZEMAN,MT 59717
Performing Department
(N/A)
Non Technical Summary
The proposed research will further producer's and society's understanding of the complex dynamic and risky production, marketing, financial, and institutional environment faced by producers. This project will is expected to result in additional information with respect to more efficient program provisions and contract designs in several different situations including conservation easements, Federal grazing policy, insurance contracts and financial markets. Information with respect to the efficiency and efficacy of crop insurance and other risk management strategies will be developed and communicated to various audiences. Direct beneficiaries are expected to be lower risk producers, administrative agencies, and U.S. taxpayers.
Animal Health Component
50%
Research Effort Categories
Basic
25%
Applied
50%
Developmental
25%
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6016110301015%
6016230301020%
6046110301020%
6046230301015%
6096110301015%
6096230301015%
Goals / Objectives
To examine the ability of incentive compatible contracts to produce win-win outcomes benefiting producers, non-agricultural entities, and administrative agencies. (Watts); to examine the effects of crop insurance and other risk management tools upon the financial and economic viability of Montana and U.S. agricultural producers. (Atwood, Watts, and Brester); to examine the effects of changes in governmental policy, regulations or other institutional provisions upon the economic and financial viability and structure of Montana and US agricultural firms. (Atwood, Watts)
Project Methods
Objective 1: The resource allocation decision is dynamic due to the intrinsic nature of grass production and the environmental resource. Therefore the terms of an optimal grazing contract will be investigated using an optimal control approach. The optimal control approach has implications for various characteristics of the grazing contracts including permanency, negotiability, the level of the grazing fee, monitoring, stewardship, nonuse, and term-violation penalties. Past research (Johnson and Watts; Robertson) has shown that permittees react to economic incentives. The reaction to various incentives will be examined using optimal control procedures. Objective 2: Data from the Federal Crop Insurance Corporation- Risk Management Agency will be examined to more accurately estimate the extent of adverse selection, moral hazard, and possibly fraudulent activity within RMA's insured pool. Both dynamic and static models of insurance markets (Rothschild and Stiglitz; Atwood, Watts, and Baquet) will be utilized to derive indicators of potential adverse selection, moral hazard, or fraud. The efficacy and accuracy of such indicators will be tested using empirical, statistical, and simulation procedures. The indicators will be used to develop possible signaling characteristics that can be used to categorize producers into different risk pools reflective of their risk characteristics. Past efforts with respect to analyzing the efficiency of various aspects of the crop insurance program and other risk management tools will be continued. These efforts will involve statistical and analytical procedures consistent with economic (Borch) and actuarial theory (Daykin, et. al) Objective 3: Static and dynamic behavioral models will be used to examine potential producer responses to proposed changes in governmental policy. Statistical procedures will be applied to empirical data sets to test the validity of the models' predictions. The potential effect of policies upon the agricultural firm's economic and financial situation will be estimated. Where applicable, estimates of the societal costs associated with a particular policy will be generated using standard welfare analysis procedures. Under an agreement with the National Agricultural Statistical Service (NASS), longitudinal and cross sectional farm level census response data will be used in an attempt to identify operational and financial characteristics of surviving agricultural firms. Statistical and data mining procedures, as appropriate will be applied during the course of the analysis.

Progress 01/01/13 to 09/30/13

Outputs
Target Audience: The results of research and findings with respect to insurance, informational asymmetries, and environmental/disease risk policy have been communicated to a widely dispersed audience ranging from policy makers and readers of professional journals to the general public and more than 1500 agricultural producers through producer meetings and web based reports. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? The results of research and findings with respect to insurance, informational asymmetries, and environmental/disease risk policy have been communicated to a widely dispersed audience ranging from policy makers and readers of professional journals to the general public and more than 1500 agricultural producers through producer meetings and web based reports. Results of this research have enabled policy makers, the public, and producers to make timelier, informed, efficient, and rational choices with respect to their physical, economic, and financial environment. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Use of public lands for private economic gain is a longstanding and contested political issue. Public lands generate benefits beyond commodity uses including recreational, environmental and ecological conservation and preservation as well as existence and aesthetic values. This problem was analyzed using a dynamic resource use game. Low fees let commodity users capture more of the marginal benefit from private use. This increases the incentive to comply with government regulations. Optimal contracts therefore include use fees that are lower than competitive private fee rates. The optimal policy also includes random monitoring to prevent strategic learning and cheating on the use agreements and to avoid wasteful efforts to disguise such noncompliant behavior. An optimal policy also includes a penalty for cheating beyond terminating the use contract. This penalty must be large enough so that the commodity user who would gain most from noncompliance experiences a negative expected net return. Research with respect to comparative farm level technical and economic efficiency benchmarks was conducted using regional and farm level data from the northern High Plains. Data Envelopment Analysis (DEA) has been in use since the 1970's and has proven to be a practical method for assessing comparative firm performance and efficiency in a setting with multiple inputs and/or multiple outputs. DEA is widely utilized by European regulatory agencies as well as by academicians world-wide. However, since their inception, traditional DEA procedures have been legitimately criticized for their limited ability to addresses data outliers and statistical noise. Research conducted under this project led to the development of procedures for identifying quantile based efficiency metrics. Quantile based data envelope procedures were shown to address issues of statistical noise and data outliers when constructing non-parametric efficiency metrics. The Quantile Data Envelopment Analysis (QDEA) thus addressed estimation issues that have limited applied DEA analysis since its inception and should have broad applicability in numerous academic research efforts and in applied fields including European and other regulatory agencies. Research with respect to various aspects of crop insurance was continued. The research included the examination and modeling of potential whole farm insurance products, the effects of the farm program provisions upon potential moral hazard, the effective of weather derivatives as hedges against agricultural risk, and the effectiveness of current and potential insurance programs and provisions for agricultural producers. As part of this research, a large scale historical weather data set has been developed and maintained that contains spatially and temporally indexed daily temperature and precipitation data from over 90,000 world-wide locations including 60,000 locations in Canada and the United States for the period 1850-2013. The weather data was internally utilized in numerous thesis projects and externally utilized by the U.S. Small Business Administration, the University of Oxford, and the University of Massachusetts at Amherst in studies of the economic effects of localized drought, temperature trended events, and the effects of climatic variables upon economic activity. This data base will prove an essential component in several ongoing and future departmental research efforts. We anticipate its continued use by external research groups and agencies.

Publications

  • Type: Journal Articles Status: Published Year Published: 2013 Citation: Pendell, D. L., G. T. Tonsor, K. C. Dhuyvetter, G. W. Brester, and T. Schroeder. "Evolving U.S. Beef Export Market Access Requirements for Age and Source Verification." Food Policy. In Press. 2013.
  • Type: Other Status: Published Year Published: 2013 Citation: Watts, M. J. ,G. Brester and G. Reusche. "Introduction to Agricultural Insurance and Risk Management." International Finance Corporation, World Bank Group, 2013.
  • Type: Other Status: Published Year Published: 2013 Citation: Watts, M. J., G. Brester and G. Reusche . "Actuarial Basics." International Finance Corporation, World Bank Group, 2013.
  • Type: Other Status: Published Year Published: 2013 Citation: Watts, M. J., G. Brester and G. Reusche. "Data and Information Management." International Finance Corporation, World Bank Group, 2013
  • Type: Conference Papers and Presentations Status: Other Year Published: 2013 Citation: Atwood, J., S. Shaik. And G. Helmers. Quantile DEA: A Direct Linear Programming Based Approach". International Meeting of Productivity and Efficiency Analysis. Helsinki, Finland. June. 2013
  • Type: Conference Papers and Presentations Status: Other Year Published: 2013 Citation: Kimm, W., H. Smart, T. Smart, G. W. Brester, and M. A. Boland. "Fries, Bakers, Tots, and Seed: The North American Potato Industry." Montana State University. Bozeman, 2013.
  • Type: Theses/Dissertations Status: Published Year Published: 2013 Citation: Hasenoehrl, A.R. "An Economic Analysis of the Impact of Decoupled Payments on Farm Solvency in the United States." 2013-2014
  • Type: Theses/Dissertations Status: Published Year Published: 2013 Citation: Villegas, L. "Does Participation in Public Works Encourage Fertilizer use in Rural Ethiopia?" 2013


Progress 01/01/12 to 12/31/12

Outputs
OUTPUTS: Research was published concerning the effects of historical agricultural policy upon regional U.S. land prices. The research involved the development of new statistical procedures that enable the statistical identification of policy effects in simultaneous equations while providing direct estimates of policy based land value shares. The land value shares were found to vary substantially by region with southern land prices being more affected by governmental programs than land prices in midwestern or western states. Research with respect to comparative farm level technical and economic efficiency was conducted using regional and farm level data from the northern High Plains. Procedures for identifying quantile based efficiency metrics were developed and applied. Quantile based data envelope procedures were shown to address issues of statistical noise and data outliers when constructing non-parametric efficiency metrics. Research with respect to various aspects of crop insurance was continued. The research included the examination and modeling of potential whole farm insurance products, the effects of the farm program provisions upon potential moral hazard, the effective of weather derivatives as hedges against agricultural risk, and the effectiveness of current and potential insurance programs and provisions for agricultural producers. As part of this research, a large scale historical weather data set has been maintained that contains daily temperature and precipitation data from over 60,000 locations in Canada and the United States for the period 1850-2012. The weather data was used in several thesis projects and a university based financial research center in studies of the economic effects of localized drought and temperature trend events and the effects of climatic variables upon economic activity. Research examined the effects of debt structure, costs of production, and the availability of crop insurance upon producer debt repayment defaults and firm failure rates was continued. Research with respect to the informational content of Constant Dollar Financial Statements (CDFS) was continued with groups of agricultural bankers and a farm management association. Research continued with respect to the economics of pollination markets and the potential economic effects of declines in bee populations. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Not relevant to this project. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
Farmers, agricultural business leaders, and policy makers in Montana, and the U.S. received and utilized information from this project in 2012. In addition, results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation. In 2012 presentations were made to over 2000 producers, policy makers, and members of the public. In addition more than 8,000 farmers, agricultural lenders, and agribusiness managers have received information with respect to the farm bill and insurance provisions through direct extension education programs and publications linked to this projects research program.

Publications

  • Shaik, S., J.A. Atwood, and G. A. Helmers. 2012. "Did 1933 New Deal Legislation Contribute to Farm Real Estate: Regional Analysis." Journal of Policy Modeling. 34(6): 801-816.
  • Shaik, S., A. Mishra, and J.A. Atwood. 2012. "Aggregation Issues in the Estimation of Linear Programming Productivity Measures." Journal of Applied Economics, XV (1): 169-187.
  • Rucker, R. 2012. "Honeybee Pollination Markets and the Internalization of Reciprocal Benefits," with Walter N. Thurman and Michael Burgett, American Journal of Agricultural Economics, July, 94(4): 956-977.
  • Bekkerman, A., V. H. Smith, and M. A. Watts. "The SURE Program and Incentives for Crop Insurance Participation: A Theoretical and Empirical Analysis." Agricultural Finance Review, 2012.
  • Smith, V. H. and J. Glauber (2012)."Agricultural Insurance in Developed Countries." Applied Economic Perspectives and Policy. September 2012.
  • Agricultural Marketing Policy Center Policy Paper 38: Risk Management Options Using the Common Crop (COMBO) Policy in Wyoming, An Irrigated Farm Example, James B. Johnson, Vincent H. Smith, & John P. Hewlett, August 2012.
  • Agricultural Marketing Policy Center Policy Issues Paper 37: The Common Crop (COMBO) Policy, James B. Johnson, Vincent H. Smith, & John P. Hewlett, August 2012.
  • Rucker, Randal R., Walter N. Thurman and Michael Burgett. "Colony Collapse: The Economic Consequences of Bee Disease," Staff Paper 2012-01, Dept. of Agricultural Economics and Economics, Montana State University, Bozeman, MT, April 2012.


Progress 01/01/11 to 12/31/11

Outputs
OUTPUTS: Research examined the effects of debt structure, costs of production, and the availability of crop insurance upon producer debt repayment defaults and firm failure rates was continued. Research with respect to the informational content of Constant Dollar Financial Statements (CDFS) was continued with groups of agricultural bankers and a farm management association. Research with respect to various aspects of crop insurance was continued. The research included the examination and modeling of potential whole farm insurance products, the effects of the farm program provisions upon potential moral hazard, the effective of weather derivatives as hedges against agricultural risk, and the effectiveness of current and potential insurance programs and provisions for agricultural producers. As part of this research, a large scale historical weather data set has been maintained containing daily temperature and precipitation data from over 56,000 locations in Canada and the United States for the period 1900-2010. The weather data was used in several thesis projects and the federal Small Business Administration in studies of the economic effects of localized drought and temperature trend events and the effects of climatic variables upon economic activity. Research with respect to comparative farm level technical and economic efficiency was conducted using regional and farm level data from the northern High Plains. Procedures for identifying quantile based efficiency metrics were developed and applied. Research with respect to the effect of renewable fuel mandates and subsidies upon firm and farm level crop prices was conducted. The research found that eliminating current ethanol subsidies while leaving the renewable fuel mandate in place would result in little or no effects upon ethanol production or commodity prices. An elimination of both the ethanol subsidy and the renewable fuel mandate would have a substantial dampening effect upon regional and farm level grain prices. Research continued with respect to the economics of pollination markets and the potential economic effects of declines in bee populations. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Not relevant to this project. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
Farmers, agricultural business leaders, and policy makers in Montana, and the U.S. received and utilized information from this project in 2011. In addition, results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation. In 2011 presentations were made to over 2000 producers, policy makers, and members of the public. In addition more than 10,000 farmers, agricultural lenders, and agribusiness managers have received information with respect to the farm bill and insurance provisions through direct extension education programs and publications linked to this projects research program.

Publications

  • Smith, V. 2011. "Premium Payments Why Crop Insurance Costs Too Much." AEI Online, and hard copy.
  • Watts, M. 2011. "Introduction to Agricultural Insurance and Risk Management." International Finance Corporation.
  • James Brown, 2011. "UNDERSTANDING MARKET RESPONSES OF U.S. ETHANOL POLICY: AN EMPIRICAL EVALUATION OF HISTORICAL PROGRAMS AND A SIMULATION OF FUTURE PROPOSALS" (Master's Thesis)
  • Rucker, Thurman, and Burgett. 2011. "Colony Collapse: The Economic Consequences of Bee Disease," Staff Paper 2011-01.
  • Elizondo, Fitzgerald, and Rucker. 2011. "You Can't Drag Them Away: An Economic Analysis of the Wild Horse and Burro Program" Staff Paper 2011-02.
  • Buschena, David E., and Joseph A. Atwood. 2011. "Evaluation of Similarity Models for Expected Utility Violations". Journal of Econometrics.
  • Watts, M. J., and A. Bekkerman. 2011. "Agricultural Disaster Aid Programs: A SURE Invitation to Wasteful Spending." American Boondoggle: Fixing the 2012 Farm Bill, AEI, Washington, DC.


Progress 01/01/10 to 12/31/10

Outputs
OUTPUTS: Research examining the effects of debt structure, costs of production, and the availability of crop insurance upon producer debt repayment defaults and firm failure rates was continued. Research with respect to the informational content of Constant Dollar Financial Statements (CDFS) was continued with groups of agricultural bankers and a farm management association. Research with respect to various aspects of crop insurance was continued. The research included the examination and modeling of potential whole farm insurance products, the effects of the SURE program upon potential moral hazard, the effective of weather derivatives as hedges against agricultural risk, and the effectiveness of current and potential insurance programs and provisions for agricultural producers. As part of this research, a large scale historical weather data set has been maintained containing daily temperature and precipitation data from over 56,000 locations in Canada and the United States for the period 1900-2010. The weather data was used in several thesis projects and the federal Small Business Administration in studies of the economic effects of localized drought and temperature trend events and the effects of climatic variables upon economic activity. Research continued with respect to the economics of pollination markets and the potential economic effects of declines in bee populations. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Not relevant to this project. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
Farmers, agricultural business leaders, and policy makers in Montana and the U.S. received and utilized information from this project in 2010. In addition, results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation. In 2010 presentations were made to over 2,000 producers, policy makers, and members of the public. In addition more than 10,000 farmers, agricultural lenders, and agribusiness managers have received information with respect to the farm bill and insurance provisions through direct extension education programs and publications linked to this projects research program.

Publications

  • Agricultural Marketing Policy Center Policy Paper 31: Livestock Indemnity Program (LIP): Montana, James B. Johnson & Vincent H. Smith, January 2010.
  • McDonald, Tyrel J., Gary W. Brester, Anton Bekkerman, and John A. Paterson. Case Study: Searching for the Ultimate Cow: The Economic Value of Residual Feed Intake at Bull Sales. The Professional Animal Scientist. 26, 6 (2010):655-660.
  • Pendell, Dustin L., Gary W. Brester, Ted C. Schroeder, Kevin C. Dhuyvetter, and Glynn T. Tonsor. Animal Identification and Tracing in the United States. American Journal of Agricultural Economics. 92, 3 (2010):927-940.
  • Rucker. R. (with Dewey Caron, Michael Burgett and Walter N. Thurman) Honey Bee Colony Mortality in the Pacific Northwest: Winter 2008/2009. American Bee Journal, March 2010.
  • Rucker. R. (with Stan Daberkow, Walter N. Thurman and Michael Burgett) U.S. Pollination Markets: Recent Changes and Historical Perspective American Bee Journal, January 2010, 35-41.
  • Smith, V.H., and M. A. Watts (2010). The New Disaster Relief Program: An Almost SURE invitation to Moral Hazard. Applied Economic Perspectives and Policy.
  • Smith, Vincent H., and Barry K. Goodwin (2010). Private and Public Roles in Providing Agricultural Insurance in the United States, in Jeffrey Brown (editor), Private and Public Roles in Insurance, AEI Press, Washington D.C.
  • Agricultural Marketing Policy Center Briefing Paper 101: Emergency Assistance for Livestock, Honey Bees and Farm-Raised Fish Program (ELAP): Wyoming, Vincent H. Smith, James B. Johnson, & John Hewlett, February 2010.
  • Agricultural Marketing Policy Center Briefing Paper 100: Emergency Assistance for Livestock, Honey Bees and Farm-Raised Fish Program (ELAP): Montana, Vincent H. Smith & James B. Johnson, January 2010.
  • Agricultural Marketing Policy Center Policy Paper 35: Supplemental Revenue Assistance Payments (SURE): Wyoming, James B. Johnson, Vincent H. Smith, & John P. Hewlett, February 2010.
  • Agricultural Marketing Policy Center Policy Paper 34: Livestock Forage Disaster Program (LFP): Wyoming, James B. Johnson, Vincent H. Smith, & John P. Hewlett, February 2010.
  • Agricultural Marketing Policy Center Policy Paper 33: Supplemental Revenue Assistance Payments (SURE): Montana, James B. Johnson & Vincent H. Smith, February 2010.
  • Agricultural Marketing Policy Center Policy Paper 32: Livestock Forage Disaster Program (LFP): Montana, James B. Johnson & Vincent H. Smith, January 2010.


Progress 01/01/09 to 12/31/09

Outputs
OUTPUTS: Research was continued that examines the effects of debt structure, costs of production, and the availability of crop insurance upon producer debt repayment defaults and firm failure rates was continued. Research with respect to the informational content of Constant Dollar Financial Statements (CDFS) was initiated with groups of agricultural bankers and a farm management association. Initial procedures for the practical implementation of CDFS by agricultural lenders and bank examiners were developed. Research with respect to various aspects of crop insurance was continued. The research included the examination and modeling of potential whole farm insurance products, potential weather derivatives, and the effectiveness of current and potential insurance programs and provisions for agricultural producers. As part of this research, a large scale historical weather data set has been constructed containing daily temperature and precipitation data from over 56,000 locations in Canada and the United States for the period 1900-2009. The weather data was used in several thesis projects examining localized drought and temperature trend events. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Not relevant to this project. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
Farmers, agricultural business leaders, and policy makers in Montana, and the U.S. received and utilized information from this project in 2009. In addition, results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation. In 2009 over 10,000 farmers, agricultural lenders, and agribusiness managers have received information with respect to the 2008 farm bill and insurance provisions through direct extension education programs and publications linked to this projects research program.

Publications

  • Rucker. R (with Stan Daberkow, Walter N. Thurman and Michael Burgett) (2009) U.S. Honey Markets: Recent Changes and Historical Perspective American Bee Journal, December:1125-1129.
  • Rucker. R. (with Michael Burgett and Walter N. Thurman) (2009) Honey Bee Colony Mortality in the Pacific NorthwestUSA Winter 2007/2008 American Bee Journal, June:573-575.
  • B. Beattie, R. Taylor, and M.J. Watts. The Economics of Production. Krieger Publishing Company: FL, 2009.
  • Boland, Michael A., and Gary W. Brester. (2009) The CHS Animal Nutrition Business Unit. In Strategic Issues for Global Managers A Book of Agribusiness Cases in Honor of Professor Ray Goldberg. Michael A Boland and Ernesto Gallo, Eds. KState Publishing: Manhattan, KS.
  • Vincent H. Smith and Myles A. Watts. (2009) Index Based Agricultural Insurance in Developing Countries: Feasibility, Scalability and Sustainability. Monograph published electronically by the Bill and Melinda Gates Foundation, November.
  • Atwood, J. A. (2009) A Brief Overview of Weather Derivatives and the Effects of Potential Trends Upon Temperature Based Derivative Prices. Staff Paper 2009-1. Department of Agricultural Economics and Economics, Montana State University, April, 2009.
  • James B. Johnson & Vincent H. Smith. (2009) Agricultural Marketing Policy Center - Policy Paper 30: Risk Management Options for Wyoming Farms, May.
  • James B. Johnson & Vincent H. Smith. (2009) Agricultural Marketing Policy Center - Policy Paper 29: Risk Management Options for Montana Ranchers, May.
  • James B. Johnson & Vincent H. Smith. (2009) Agricultural Marketing Policy Center - Policy Paper 28: Risk Management Options for Montana Farms, May.
  • James B. Johnson, Vincent H. Smith, John P. Hewlett. (2009) Agricultural Marketing Policy Center Policy Paper 27: Risk Management Options for Wyoming Ranchers, January.
  • Gary W. Brester & Vincent H. Smith. (2009) Agricultural Marketing Policy Center Briefing 99: National Animal Identification Systems: Options for the United States and Implications for Montana, July.
  • Vincent H. Smith, James B. Johnson, & John P. Hewlett. (2009) Agricultural Marketing Policy Center Briefing 98: Pasture, Rangeland and Forage (PRF) Vegetation Index Insurance: A New Group Risk Plan in Wyoming, 2009.
  • Vincent H. Smith, James B. Johnson, & John P. Hewlett. (2009) Agricultural Marketing Policy Center Briefing 96: Pasture, Rangeland and Forage (PRF) Rainfall Index Insurance: A New Group Risk Plan Available in Montana, April 2009
  • Vincent H. Smith and James B. Johnson. (2009) Agricultural Marketing Policy Center Briefing 95: AGR-Lite: An Option for Montana Producers, 2009.
  • Brester, Gary W, John M. Marsh, and Joseph Atwood. (2009) Evaluating the Farmers Share of the Retail Dollar Statistic. Journal of Agricultural and Resource Economics. 34(213-236)


Progress 01/01/08 to 12/31/08

Outputs
OUTPUTS: Research with respect to various aspects of crop insurance was continued. The research included the examination and modeling of potential whole farm insurance products, potential weather derivatives, and the effectiveness of current and potential insurance programs and provisions for agricultural producers. Potential temperature trends were estimated using up to 108 years of minimum and maximum daily temperature data observations from each of approximately 4000 locations in the United States. The resulting estimated trends were found to vary by temperature variable, season, and region. Initial estimates of the effects of trends upon pricing of potential weather derivatives were obtained. Preliminary results indicate that failing to account for potential trends when pricing weather derivatives and/or insurance products may result in mispricing by as much as 40-60 percent for some derivatives or insured perils. Research was initiated that examines the effects of debt structure, costs of production, and the availability of crop insurance upon producer debt repayment defaults and firm failure rates. The results indicate that the costs of purchasing insurance may increase the frequency of small default events while simultaneously truncating the magnitude of severe defaults and increasing long term firm survival rates. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The results of research and findings with respect to insurance, informational asymmetries, and environmental/disease risk policy have been communicated to a widely dispersed audience ranging from policy makers and readers of professional journals to the general public and agricultural producers. Results of this research have enabled policy makers, the public, and producers to make more timely, informed, efficient, and rational choices with respect to their physical, economic, and financial environment. Results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation.

Publications

  • Brester, Gary W., John M. Marsh, and Joseph Atwood. "Evaluating the Farmer's-Share-of-the-Retail-Dollar Statistic" First Revision submitted to the Journal of Agricultural and Resource Economics. October 2008.
  • Vanek, Joseph K., Myles J. Watts, and Gary W. Brester. "Carcass Quality and Genetic Selection in the Beef Industry." Journal of Agricultural and Resource Economics. 2009.
  • Buschena, David E., and Joseph A. Atwood. Applying Econometric Methods to Decision Cost Models for Expected Utility Violations. Journal of Econometrics. 2009.


Progress 01/01/07 to 12/31/07

Outputs
Research examining the proportion of agricultural land values that are attributable to government payments was continued. Research continues in developing procedures enabling the identification of spatial and intertemporal differences in the shares of agricultural land values generated by government payments. Research was initiated that examines the effects of debt structure, costs of production, and the availability of crop insurance upon producer debt repayment defaults and firm failure rates was continued. The results indicate that the costs of purchasing insurance may increase the frequency of small default events while simultaneously truncating the magnitude of severe defaults and increasing long term firm survival rates. Research with respect to various aspects of crop insurance was continued. The research included the examination and modeling of potential whole farm insurance products, potential weather derivatives, and the effectiveness of current and potential insurance programs and provisions for agricultural producers. Several studies were completed examining the economics of potential biofuel production by agricultural producers and/or groups of agricultural producers.

Impacts
Farmers, agricultural business leaders, and policy makers in Montana, and the U.S. received and utilized information from this project in 2007. In addition, results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation.

Publications

  • Schumacher, Joel B. "Biodiesel: Frequently Asked Questions," Agricultural Marketing Policy Center Briefing Paper #89, 2007.
  • Schumacher, Joel B. "Small Scale Biodiesel Production: An Overview," Agricultural Marketing Policy Center Policy Paper #22, 2007.
  • Schumacher, Joel B. "Oilseed Processing: An Overview," Agricultural Marketing Policy Center Briefing Paper #86, 2007.
  • Schumacher, Joel B. "Small Scale Oilseed Processing," Agricultural Marketing Policy Center Briefing Paper #88, 2007.
  • Schumacher, Joel B. "Biodiesel Cash Flow," 2007 [Income Statement Worksheet].
  • Smith, Vincent H. and Cookson, Tony. "Malt Barley Production, Brewer Demand, and Crop Insurance Options," Agricultural Marketing Policy Center Briefing Paper #90, September 2007.
  • Smith, Vincent H. and Goodwin, Barry K. "Harvest-Time Protein Shocks and Price Adjustment in U.S. Wheat Markets," Agricultural Marketing Policy Center Policy Issues paper #23, August 2007
  • Viator, Catherine L., Sheryl C. Cates, Mary K. Muth, Shawn A. Karns, and Gary W. Brester. "Cash Versus Contract Marketing in the U.S. Lamb Industry." Sheep & Goat Research Journal. 22(2007):32-41.
  • Boland, Michael A., Alena M. Bosse, and Gary W. Brester. "The Mountain States Lamb Cooperative: Can Vertical Integration Keep Lamb Producers From Being Fleeced?" Review of Agricultural Economics. 29, 1(Spring 2007):157-169.
  • Brester, Gary W., John M. Marsh, and Joseph Atwood. "Measuring Welfare Effects of Restricting Livestock Marketing Margin Methods in the Beef Industry: A Stochastic, Dynamic Equilibrium Approach." 2007 American Agricultural Economics Association Organized Symposium." Portland, OR. July, 2007.
  • Buschena, David E., David Zilberman, and Joseph A Atwood. "Risk Attitudes Over Income With Discrete Status Levels." Review of Agricultural Economics. Vol. 29 (Fall, 2007): 405-411.
  • Johnson, J. B., Haynes, George W. & Brester, Gary W., "The 2007 Farm Bill: Montana producer preferences for agricultural, food and public policy," Agricultural Marketing Policy Paper 20, February 2007.
  • Rucker, Randal R. "The End of the Federal Tobacco Program: Economic Impacts of the Deregulation of U.S. Tobacco Production," with A. Blake Brown and Walter N. Thurman, Review of Agricultural Economics (Volume 29, Number 4, Winter 2007, pp. 635-655).
  • Rucker, Randal R. "The Growth of U.S. Farm Programs," with E. C. Pasour, Jr., Chapter 16 in Government and the American Economy from Colonial Times to the Present, University of Chicago Press, 2007: 456-489.
  • Schumacher, Joel B. "Transferring Farm or Ranch Property to the Next Generation through a QTIP Trust," 2007 [MontGuide].
  • Schumacher, Joel B. "Commercial Biodiesel Production in Montana," Agricultural Marketing Policy Center Briefing Paper #91, 2007.


Progress 01/01/06 to 12/31/06

Outputs
A study was continued that developed modified procedures for estimating the proportion of agricultural land values that are attributable to government payments. Research continues in developing procedures enabling the identification of state, regional and intertemporal differences in the shares of agricultural land values generated by government payments. A study was initiated that will enable producers to estimate firm survival rates under a user defined set of financial and resource inputs. The models enable a producer to examine the likelihood of firm survival over differing planning horizons while incorporating regional specific risks and long run historical drought events. A study was continued on the potential for satellite images to provide useful information with respect to ground based forage and grazing production. Potential applications include a satellite based insurance system for Montana range producers. A hedonic pricing model is being developed to estimate the significance of carcass quality traits on bull prices. Initial results indicate that progeny carcass traits are statistically significantly related to bull prices. The study will continue using time series data to evaluate any changes in carcass trait significance over time.

Impacts
Farmers, agricultural business leaders, and policy makers in Montana, and the U.S. received and utilized information from this project in 2006. In addition, results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation.

Publications

  • Atwood, J.A., J. Robison-Cox, and S. Shaik. A Statistical Examination of 'Yield Switching' Fraud in the Federal Crop Insurance Program. American Journal of Agricultural Economics 88, no. 2 (May 2006) 365-81.
  • Atwood, J.A., and M.J. Watts. Using Satellite-Based and/or Weather Station Information to Construct Smaller than County Sized Area Insurance Instruments. Presented at SCC-76 Economics and Management of Risk in Agriculture and Natural Resources, Myrtle Beach, SC, March 16-18, 2006.
  • Jason W. Jimmerson. Marketing Minor Crops in Montana. Master of Science Thesis, Montana State University, March 2006. Vincent H. Smith, Thesis chairperson.
  • Leffler, Keith B., Randal R. Rucker, and Ian Munn, The Choice Among Sales Procedures: Auction vs. Negotiated Sales of Private Timber, Staff Paper 2006-3, Dept. of Agricultural Economics and Economics, Montana State University, Bozeman, MT, December 2006.
  • Miller, Perry, Dave Buschena, Clain Jones, Rich Smith, and Andy Hulting. Agroeconomic Analyses of Organic and No-Ttill Diversified Cropping Systems in the Northern Great Plains. Ecological Society. In (CD-ROM) Agronomy Abstracts, ASA, Memphis, 2006.
  • Montana State Agricultural Marketing Policy Center, Briefing Paper 81: Livestock Risk Protection for Swine in Wyoming, James B. Johnson and John Hewlett, May 2006.
  • Montana State Agricultural Marketing Policy Center, Briefing Paper 82: Livestock Risk Protection for Fed Cattle in Wyoming, James B. Johnson and John Hewlett, May 2006.
  • Montana State Agricultural Marketing Policy Center, Policy Paper 13: Group Risk Income Protection, James B. Johnson and John Hewlett, July 2006.
  • Montana State Agricultural Marketing Policy Center, Policy Paper 14: Crop Insurance for Alfalfa Seed Production: A Pilot Program Available in Select Wyoming Counties, James B. Johnson and John Hewlett, July 2006.
  • Montana State Agricultural Marketing Policy Center, Policy Paper 15: Nursery Crop Insurance in Wyoming, James B. Johnson and John Hewlett, September 2006.
  • Montana State University Agricultural Marketing Policy Center Policy Paper 16: Oilseed, Biodiesel and Ethanol Subsidies & Renewable Energy Mandates: US Federal & Selected State Initiatives, Joel Schumacher, November 2006.
  • Montana State University Agricultural Marketing Policy Center Policy Paper 19: Montana Oilseed Markets: Historical Price and Production Statisitics, Joel Schumacher, November 2006.
  • Shaik, S., J.A. Atwood, and G. Helmers. Farm Programs and Agriculture Land Value: Case of Southern Agriculture. Selected Paper, SAEA Annual Meeting, Orlando, Florida, February 5-8, 2006.


Progress 01/01/05 to 12/31/05

Outputs
Statistical procedures for identifying potential fraud within the Federal Crop Insurance program were improved and modified. The research also developed new procedures for identifying the number of estimable and non-estimable contrasts in set of restrictions within a singular regression model. Identifying the number of estimable contrasts in a set of restrictions is required for accurate hypotheses testing. Identifying and reducing potentially fraudulent activity is useful to Montana producers in that reducing the extent of fraud in federal crop insurance will reduce premium rates paid by Montana producers. A study was continued that developed modified procedures for estimating the proportion of agricultural land values that are attributable to government payments. Research continues in developing procedures enabling the identification of state, regional and intertemporal differences in the shares of agricultural land values generated by government payments. A study was completed that developed procedures for using futures and options markets to determine the informational content of satellite-based information in estimating crop yields. The study indicated that satellite based yield estimates have informational content but trading futures contracts based upon this information may expose the trader to substantial downside risk. The results of this study are potentially useful to Montana producers in that they demonstrate both the informational content and the risks of using satellite images when estimating the potential yields of a growing crop in closer to real time.

Impacts
Farmers, agricultural business leaders, and policy makers in Montana, and the U.S. received and utilized informaiton from this project in 2005. In addition, results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation

Publications

  • Atwood, J.A., J. Robison-Cox, and S. Shaik. A Statistical Examination of Yield Switching Fraud in the Federal Crop Insurance Program. Forthcoming American Journal of Agricultural Economics. May 2006.
  • Atwood, J.A. and J. Kastens. Spatial Analysis in Crop Insurance, WAEA Annual Meeting, San Francisco, CA July 2005.
  • Martin, Lucanus. Satellite Production Forecasts: Valued with Simulated Futures and Options Trading. Master Thesis. Department of Agricultural Economics and Economics. Montana State University. 2006.
  • Swanser, K. Determinants of Seller Choice Between Auction and Negotiation: An Empirical Application to Cattle Markets. Master Thesis, Department of Agricultural Economics and Economics. Montana State University. 2005.
  • J. Johnson, G. Brester, Forage Production Risk Management in Montana-Crop Insurance, Agricultural Marketing Policty Center, Briefing Paper 80, November 2005.
  • J. Johnson, G. Brester. Livestock Risk Protection for Feeder Cattle, Agricultural Marketing Policy Center, Briefing Paper 46, November 2005.
  • J. Johnson, G. Brester. Forage and Rangeland Production Risk Management in Montana: Non-insured Crop Disaster Assistance Program, Agricultural Marketing Policy Center, Briefing Paper 39, November 2005.
  • J. Johnson, Noninsured Crop Disaster Assistance Program, Agricultural Markeing Policy Center, Briefing Paper 14, November 2005.
  • G. Brester, D. Buschena. Chickpea Production and Price Risk Management in the Northern Plains, Agricultural Marketing Policy Center, Briefing Paper 78, August 2005.
  • J. Johnson, G. Brester, J. Hewlett. GRP Rangeland Insurance for Wyoming. Agricultural Marketing Polciy Center, Policy Paper 8. November 2005.
  • J. Johnson, G. Brester, J. Hewlett. GRP Rangeland Insurance for Montana, Agricultural Marketing Policy Center, Policy Paper 7. November 2005.
  • Shaik, S., J. A. Atwood and G. Helmers. The Evolution of Farm Programs and their Contributions to Agricultural Land Values. American Journal of Agricultural Economics. Vol. 87, No 5 (Dec 2005) pp: 1190-1197
  • Shaik, S., and J.A. Atwood, Spatial Analysis in Federal Crop Insurance: Challenges and Opportunities, at the AAEA Annual Meeting, Providence, RI July 2005.
  • Shaik, S. and J. A. Atwood. Spatial Analysis in Federal Crop Insurance: Challenges, at the WAEA Annual Meeting, San Francisco, CA July 2005.
  • Shaik, Saleem, J. A. Atwood, and G. Helmers. The Evolution of Farm Programs and Their Contributions to Farm Size, Selected Paper, at the AAEA Annual Meeting, Providence, RI July 2005.


Progress 01/01/04 to 12/31/04

Outputs
A study was completed that examined the usefulness of satellite images in predicting and validating estimated wheat and range condition values. The model's predictions of yields are more efficient that those of previously published studies. The results of this study are potentially useful to Montana producers in that they demonstrate the ability of remote sensing data to estimate the yield potential of a growing crop in closer to real time. However the results also demonstrate that early season forecasts need to be interpreted cautiously as later season events can cause large deviations between the early season models predicted yield potential and the realized yields. A study was completed that estimated the proportion of agricultural land values that are attributable to government payments. The study's results indicate that, nation wide, approximately 30-35 percent of agricultural land values are attributable to government payments. The study is being refined to examine the corresponding land value shares for Montana. Statistical procedures for identifying potential fraud within the Federal Crop Insurance program were improved and modified. Identifying and reducing the extent of fraud within the Federal Crop Insurance system has the potential to generate cost savings for Montana producers and taxpayers. In 2004, a total of 9 publications were produced under this project. Topics addressed in these publications include risk management and crop insurance, honey policies, and remote sensing applications in agriculture. The mix of publications indicates that the research output from this project has been widely disseminated to researchers, policy makers, and agricultural producers in Montana and throughout the United States.

Impacts
Farmers, agricultural business leaders, and policy makers in Montana, and the U.S. received and utilized information from this project in 2004. In addition, results of the research were used by Federal Agency and Congressional leaders in formulating agricultural policy and legislation.

Publications

  • S. Shaik, J.A. Atwood, and G.H. Helmers, Government Payments and Agricultural Land Values. Zhen, C., J. Atwood, and D. Buschena, Improving Statistical Models of Crop Yield Forecasting Using AVHRR-NDVI Satellite Data. Staff Paper No. 2004-3. Montana State University. Department of Agricultural Economics and Economics. December, 2004.
  • Atwood, J.A., J. Robison-Cox, and S. Shaik, A Statistical Examination of Yield Switching Fraud in the Federal Crop Insurance Program. Selected Paper presented at the AAEA Annual Meeting, Denver, Colorado, August1-4, 2004
  • Brester, G.W. J. M. Marsh, and J. A. Atwood, Distributional Impacts of Country-of-Origin Labeling in the U.S. Meat Industry. Journal of Agricultural and Resource Economics. 24, No. 2 (2004):206-227.
  • Milliken, N. V. H. Smith, and M. J. Watts, Street Smart Economics. Montana Business Quarterly, Vol 42(1), Spring 2004.
  • Johnson, J.B. G. Patrick, and D. Cash, Managed Haying and Grazing of CRP. Montana State University Agricultural Marketing Policy Briefing paper # 64, April 2004. Robison-Cox, J. and J.A. Atwood, Detecting Yield-Switching Fraud in Crop Insurance Records.
  • Rucker, Randall, Walter N. Thurman and Michael Burgett, Economics and Honeybee Pollination Markets. American Bee Journal, April 2004, 269-71.


Progress 01/01/03 to 12/31/03

Outputs
Research at Montana State University examined the incentives, efficiency, and firm level effects of crop insurance provisions, insurance moral hazard-fraud incentives, natural resource policy, contractual arrangements, and environmental/disease event policies. New statistical procedures were developed for identifying some types of fraudulent conduct. Studies examined the costs and implications of fraud, moral hazard, and other implications of informaitonal asymmetries.

Impacts
The results of research and findings with respect to insurance, informational asymmetries, and environmental/disease risk policy were communicated to a widely dispersed audience ranging from policy makers and readers of professional journals to the general public and agricultural producers. Results of this research enable policy makers, the public, and producers to make more timely informed, efficient, and rational choices with respect to their physical economic, and financial environment. As an example, the research results with respect to fraudulent conduct provide policy makers with evidence of needed reforms in crop insurance provisions. If adopted, such reforms should eventually lead to lower costs to both honest producer and the taxpayer.

Publications

  • Atwood, J., S. Shaik and M. Watts. "Are Crop Yields Normally Distributed? A Reexamination." American Journal of Agricultural Economics. Vol. 85, No 4 (Nov 2003) pp: 888-901.
  • Atwood, J.A., and D.E. Buschenna, "Evaluating the Magnitudes of Financial Transaction Costs on Risk Behavior." Agricultural Systems. Vol. 75, No. 2-3 (Febr-March 2003) pp235-250.
  • Atwood, J.A., J. Robison-Cox, and S. Shaik. "A Direct Test of Yield Switching Fraud in the Federal Crop Insurance Program." Staff Paper 2003-???. Montana State University. Department of Agricultural Economics and Economics. November, 2003.
  • Buschena, D. B. "Expected Utility Violations: Implications for Agricultural and Natural Resource Economics." American Journal of Agricultural Economics Vol. 85 (2003): 1242-1249.
  • Buschena, D., M. Watts, and K. Kiesel. "Economic Modeling Effort for Brucellosis Outbreaks in Cattle Herds in the Greater Yellowstone Area." Montana State University, Department of Agricultural Economics and Economics, Staff Paper No. 2003-03, 2003.
  • Goodwin, B.K., and V. H. Smith. (2003) "An Ex-Post Evaluation of the Conservation Reserve, Federal Crop Insurance, and Other Government Programs: Program Participation and Soil Erosion." Journal of Agricultural and Resource Economics, August. 2003.
  • Goodwin, B. K., and V. H. Smith. "The Effects of Crop Insurance and Disaster Relief Programs on Soil Erosion: The Case of Soybeans And Corn." in Agricultural Policies and the Environment, editors Joseph Lekakis, Robert Fraser and Bruce Babcock, Dordrecht, The Netherlands, Kluwer Academic Publishers. 2003
  • Johnson, J. and V. H. Smith. "Adverse Impacts of Drought on Crops and Crop Producers." In: Western Economics Forum, Volume 2, Number 1, April, 2003.
  • Smith, V.H. "Federal Crop and Crop Revenue Insurance Programs: Income Protection." AMPC Briefing Paper #9 (revised), October 2003
  • Smith, V.H.. "Federal Crop and Crop Revenue Insurance Programs: Multiple Peril Crop Insurance (MPCI) and Catastrophic Policy." AMPC Briefing Paper #8 (revised), October 2003
  • Smith. V.H. "Federal Crop and Crop Revenue Insurance Programs: Determining APH Yield." AMPC Briefing Paper #9 (revised), October 2003
  • Smith. V.H. "Federal Crop and Crop Revenue Insurance Programs: Optional, Basic and Enterprise Units: Multiple Peril Crop Insurance (MPCI) and Catastrophic Policy." AMPC Briefing Paper #6 (revised), October 2003


Progress 01/01/02 to 12/31/02

Outputs
Research at Montana State examined the contractual efficiency and incentives with respect to resource conservation, property rights, tenure arrangements, crop insurance provisions, and crop insurance related moral hazard incentives. Studies examined the implications and costs of informational asymmetries with respect to insurance and other contractual arrangements. Other contractual arrangements include farm leasing arrangement, public land grazing permits, breeding livestock sale quarantine information, and timber contracts.

Impacts
Research found strong evidence of informational asymmetries between producers, insurance companies and governmental agencies. Evidence of adverse selection, moral hazard, and potential fraud was found in most areas and crops examined. Several inefficiencies in existing governmental insurance products and provisions were identified and analyzed. Provisional changes designed to reduce adverse selection, moral hazard, and fraud incentives were developed, several of which have been implemented via congressional legislation or agency action. These include provisions to enable more accurate tracing of a producer's loss history over time and a statistical screening system designed to identify potentially aberrant conduct or loss patterns. Net effects of the research should include reduced incentives to participate in illicit conduct, reduced premiums for producers, and reduced taxpayer outlays. Statistical risk indicators were identified that may potentially enable lower risk producers to effectively signal their lower risk status to insurers, resulting in lower premiums and more effective insurance coverage. The verocity of information at the time of sale is an important buyer consideration. This provided information becomes part of the buyer/seller implied contract. Domestic livestock grazing on public lands and enforcing environmental requirements is expensive and controversial. Alternative contractual terms have been investigated which will reduce controversy and the need for cohesive action.

Publications

  • Helmers, G.A. and J. Atwood. 'Causes for Convexity in Remaining Value Functions.' Proc. S.E. Dec. Sci. Inst. pp. 28-30, 2002.
  • Lueck, D. 'The Extermination and Conservation of the American Bison.' Journal of Legal Studies (in press, 2002.)
  • Muth, M.K., R.R. Rucker, W.N. Thurman and C.T. Chuang 'The Fable of the Bees Revisited: Causes and Consequences of the U.S. Honey Program.' Staff Paper 2002-3 (Revision of Staff paper No. 2001-3), Dept. of Agricultural Economics and Economics, Montana State University, Bozeman, MT, September 2002.
  • Rucker, R.R., W.N. Thurman and M. Burgett, 'The Internalization of Reciprocal Benefits: An Analysis of Honeybee Pollination Markets,' Staff Paper 2002-4 (Revision of Staff paper No. 2001-4), Dept. of Agricultural Economics and Economics, Montana State University, Bozeman, MT, September 2002.
  • Rucker, R.R., W.N. Thurman, and J. Yoder. 'Estimating the Structure of Market Reaction to News: Information Events and Lumber Futures Prices.' Staff Paper 2002-5 (Revision of Staff paper No. 2000-9), Dept. of Agricultural Economics and Economics, Montana State University, Bozeman, MT, February 2002.
  • Shaik, S. and J.A. Atwood. 'An Examination of Types of Adverse Selection in Federal Crop Insurance.' Selected paper, Western & Am. Agr. Econ. Assn. Mtgs., Long Beach, CA July 28-31, 2002.
  • Shaik, S. and J.A. Atwood. 'Optional Unit Policy in Crop Insurance.' Selected paper, Western & Am. Agr. Econ. Assn. Mtgs., Long Beach, CA July 28-31, 2002.
  • Atwood, J.A., S. Shaik, and M.J. Watts. 'Are Crop Yields Normally Distributed?: A Reexamination.' American Journal of Agricultural Economics. (forthcoming 2003.)
  • Atwood, J.A., S. Shaik, and M.J. Watts. 'Can Normality of Yields be assumed for Crop Insurance?' Canadian Journal of Agricultural Economics. Vol. 50, No. 2 pp: 171-184 (July 2002).
  • Atwood, J.A., G.A. Helmers and S. Shaik. 'Farm and Nonfarm Factors Influencing Farm Size.' Selected paper, Western & Am. Agr. Econ. Assn. Mtgs., Long Beach, CA., July 28-31, 2002.
  • Beattie, B., M. Holt, and M. Watts. 'On the Function Coefficient, Eulers Theorem, and Homogeneity in Production Theory.' Review of Agricultural Economics. Vol. 24, No. 1: 240-249 (Spring/Summer 2002.)
  • Geddes, R. and D. Lueck. 'The Gains from Self Ownership and the Expansion of Women's Rights.' American Economic Review Vol. 92, No. 4: 1079-1092 (September 2002.)


Progress 01/01/01 to 12/31/01

Outputs
Researchers at Montana State examined the efficiency and effectiveness of crop insurance as a mechanism to control the production and financial risks of agricultural producers. Researchers also examined the effects of transaction costs and insurance upon the organizational and resource utilization decision of agricultural firms.

Impacts
Risk-sharing does not appear to explain the choice or structure of contracts (share versus cash land lease) or explain the organization (family versus corporate farms) or farms. Incentives for optimal farmer performance (effort, land and equipment maintenance) determine contracts and organizations. Current provisions of the Risk Management Agency's insurance program appear to provide incentives for producers to modify their behavior with respect to non-insurance risk management strategies including resource use and other risk reducing activities. Current rating structures can be improved to more accurately account for reductions in risk as larger farms are jointly insured. A small number of producers appear to be repeatedly generating a disproportionate share of insurance indemnification claims. Given inherent information asymmetries, incorporating information from a producer's relative loss history into their premium rates would appear to increase the effectiveness of RMA's crop insurance program. Being able to differentiate premiums should result in premiums being lowered for many producers.

Publications

  • Allen, D.W. and Lueck, D. 2002 In press. The Nature of the Farm: Contracts, Risk and Organization in Agriculture. MIT Press.
  • Atwood, J.A. and Buschena, D.E. 2002 In press. Book Chapter. Evaluating the Magnitudes of Financial Transactions Costs on Risk Behavior. In Buschena, D.E. and Taylor, C.R. Advances in Risk Impacting Agriculture and the Environment.
  • Atwood, J.A., Shaik, S. and Watts, M.J. 2001. Examination of Adverse Selection in Crop Insurance. Staff Paper, Department of Agricultural Economics and Economics, Montana State University, Bozeman, 2001-02.
  • Watts, M.J., Atwood, J. and Shaik, S. 2001. Assessment of Implementability of Income Protection. Department of Agricultural Economics and Economics, Montana State University, Bozeman.
  • Watts, M.J., Beattie, B.R. and Holt, M.T. 2002. In Press. On the Function Coefficient, Eulers Theorem, and Homogeneity in Production Theory. Review of Agricultural Economics. Vol. 24.
  • Watts, M.J., Chvosta, J. and Rucker, R.R. 2001. Transaction Costs and Cattle Marketing: The Information Content of Seller-Provided Data at Bull Auctions. American Journal of Agricultural Economics. 83(2).
  • Goodwin, B.K. and Smith, V.H. 2002 In press. The Effects of Crop Insurance and Disaster Relief Programs on Soil Erosion: The Case of Soybeans and Corn. In Babcock, B., Fraser, R. and Lekakis, J.N. Agricultural Risk Management and the Environment, Dordrecht, The Netherlands: Kluwer Academic Publishers.
  • Lueck, D. and Allen, D.W. 2001. A Transaction Cost Primer on Farm Organization. Canadian Journal of Agricultural Economics 48: 643-652.
  • Lueck, D., Vukina, T. and Hilmer, C.E. 2001. A Hotelling-Faustmann Explanation of the Structure of Christmas Tree Pricing. American Journal of Agricultural Economics. Vol 83:512-525.
  • Watts, M.J., Atwood, J. and Shaik,S. 2001. Analysis of Difference Between IP and MPCI Rates (Cotton Review). Staff Paper, Department of Agricultural Economics and Economics, Montana State University, Bozeman. 2001-01.


Progress 01/01/00 to 12/31/00

Outputs
Researchers at Montana State have examined the effects of transaction costs, and optimal land, labor, and equipment use on farm and ranch organizational structure, the determinants of lease vs. purchase decisions, the effects of various regulations on efficient resource use, and the effectiveness and cost of crop insurance as a risk management tool.

Impacts
Wealthier farmers are more likely to lease assets. Farmers who face timeliness constraints are more likely to own assets. Risk sharing does not appear to explain the structure or choice of contracts (share vs. cash rent land lease) or farm organization. The study finds that implicit or explicit producer incentives for optimal input uses appear to explain the choice of contract. The Risk Management Agency's crop insurance pool appears to strongly adversely selected implying that the higher risk producers are subsidized and insured to a greater extent than lower risk producers. Current efforts to increase participation by reducing premiums will result in larger taxpayer outlays if simultaneous efforts are not made to more correctly risk pool producers of different risk levels. A proportionally small number of producers appear to be submitting questionable insurance claims against Risk Management Agency. While the number of producers engaged in obviously questionable conduct is relatively small, the higher premium costs to honest producers and additional taxpayer outlays are substantial. Being able to more effectively identify questionable conduct would result in significantly lower insurance premiums for the vast majority of producers making crop insurance a more viable risk management tool for agricultural producers.

Publications

  • Lueck,D., Allen,D.W., 2001. 'A Transaction Cost Primer on Farm Organization.' Candadian Journal of Agricultural Economics.
  • Leuck,D., Allen, D.W., 2001'The Control of Farm Assets: Ownership vs. Contracting.
  • Leuck,D., Allen, D.W., 2001'The Nature of the Farm: A Study of Contracts and Organization in Agriculture.' Book manuscript.
  • Leuck,D., Vukina,T. and Hilmer, C.E., 2001 'A Hotelling-Faustmann Explanation of the Structure of Christmas Tree Pricing.'
  • Atwood,J.A., Shaik,S., and Watts,M.J. 2000 'Measurement of Adverse Selection in Crop Insurance Using an Expected Indemnity Approach.'
  • Atwood,J.A., Shaik,S., and Watts,M.J. 2000 'Can Normality of Crop Yields Be Assumed for Crop Insurance.'
  • Anderson, I., Watts, M.J., and Atwood, J.A. 2000 'The Effects of Adverse Selection and Effective Coverage Levels on Crop Insurance Participation.'
  • Atwood, J.A., Shaik,S., Watts, M.J. 2000 'An Examination of the Extent of Illicit Yield Switching Between Optional Crop Insurance Units.'
  • Shaik, S., and Atwood, J.A. 2000 'Estimating the Demand of Insurance and Supply of Indemnity Payments in Crop Insurance.' presented at the annual meetings of the American Agriculture Economics Association, Tampa, FL Jul 30-Aug 2,2000.
  • Atwood,J.A., and Saltiel,J. January, 2000 'Heteroskedasticity of Farm Level Residual Variability.' Staff Paper 2000-2. Montana State University. Department of Agricultural Economics and Economics.
  • Atwood,J.A., and Watts, M.J. January, 2000 'Rating Avocado Insurance: An Overview.' Staff Paper 2000-6. Montana State University. Department of Agricultural Economics and Economics.
  • Watts, M.J., Atwood, J.A., and Shaik, S. January 2000 'Low Risk Farmer.' Staff Paper 2000-5. Montana State University. Department of Agricultural Economics and Economics.
  • Watts, M.J., and Sowell, B. January, 2000. 'Range/Pasture Crop Insurance, Stage 1 Report (Revised).' Staff Paper 2000-1. Montana State University. Department of Agricultural Economics and Economics. January, 2000.
  • Watts, M.M., and Prince, C. January, 2000. 'Optional Units.' Staff Paper 2000-3. Montana State University. Department of Agricultural Economics and Economics.
  • Anderson, I. and Watts, M.J. January 2000. 'The Effects of Adverse Selection and Effective Coverage Levels on Crop Insurance Participation.' Staff Paper 2000-4. Montana State University. Department of Agricultural Economics and Economics.
  • Chvosta, J., Rucker, R., and Watts, M.J. January 2000. 'Transaction Costs and Cattle Marketing: The Information Content of Seller-Provided Data at Bull Auctions.' Staff Paper 2000-7. Montana State University. Department of Agricultural Economics and Economics.
  • Watts, M.J., and LaFrance, J.T. 2000 'Grazing Fees versus Stewardship on Federal Lands.'
  • Felkey, A.J. 2000 'The Effects of Privatization Methods on Bulgarian Agricultural Productivity.' Master Thesis


Progress 01/01/99 to 12/31/99

Outputs
A study (Lueck and Allen) examined the role of risk in determning agricultural contract choice. The study found that yield risk is not as important a determinant of contracts for land as other factors such as soil exploitation and crop measurement costs. A different study (Lueck and Allen) examined the reason that small family businesses still dominate production agriculture. The basic finding was that much of North American agriculture is highly seasonal which limits the gains from specialized labor. Family organizations, however, have the advantage that work incentives are superior to large organizations. A study on agricultural research and productivity was completed (Alston, Pardey, and Smith). Several studies and briefing papers were completed involving proposed changes and problems with Federal crop insurance programs. The degree and cost of adverse selection within the Risk Management Agency's insured pool was tested and estimated (Atwood and Shaik). Different studies examined several patterns of suspected fraud and the estimated costs of producer yield switching to the insurance program as well as potential information that could be extracted from producer reported yields.

Impacts
(N/A)

Publications

  • Anderson, I., M.J. Watts, and J.A. Atwood. 'The Effects of Adverse Selection and Effective Coverage Levels on Crop Insurance Participation.' To be submitted to American Journal of Agricultural Economics, February 2000.
  • Atwood, J.A., S. Shaik, G.A. Helmers, and M. Langemeier. 'Impact of Nitrogen Reductions on Risk and Net Returns.' Southern Agr. Econ. Assn. Meetings, Memphis, TN Jan. 30-Feb. 3, 1999. Abstract forthcoming.
  • Atwood, J.A., and M.J. Watts. 'Federal Crop Insurance Programs and Cotton Briefing Information.' Staff Paper 1999a-5. Montana State University. Department of Agricultural Eocnomics and Economics. May, 1999.
  • Atwood, J.A., J. Driscoll, V. Smith, and M.J. Watts. 'Federal Crop Insurance Programs - History, Practice, and Issues.' Staff Paper 1999a-4. Montana State University. Department of Agricultural Economics and Economics. May, 1999.
  • Atwood, J.A., and M.J. Watts. 'Crop Insurance Update and Discussion.' Staff Paper 1999a-6. Montana State University. Department of Agricultural Economics and Economics. June, 1999.
  • Atwood, J.A., G.A. Helmers, and S. Shaik. 'Examining the Effects of Rural Economies on Farm Size and Off-Farm Employment.' Staff Paper 1999a-1. Montana State University. Department of Agricultural Eocnomics and Economics. July, 1999.
  • Atwood, J.A., and S. Shaik. 'Measurement of Adverse Selection in Crop Insurance Using an Expected Indemnity Approach.' Staff Paper 1999a-2. Montana State University. Department of Agricultural Economics and Economics. December 1999.
  • Atwood, J.A., S. Shaik, and M.J. Watts. 'Are Crop Yields Really Normally Distributed?' Staff Paper 1999a-3. Montana State University, Department of Agricultural Economics and Economics. December 1999.
  • Atwood, J.A., and J. Saltiel. 'Hetroskedasticity of Farm Level Residual Variability.' Staff Paper 2000-2. Montana State University. Department of Agricultural Economics and Economics. January, 2000.
  • Atwood, J.A., and M.J. Watts. 'Rating Avocado Insurance: An Overview.' Staff paper 2000-6. Montana State University. Department of Agricultural Economics and Economics. January 2000.
  • Di, Hua. 'Understanding Chinese Farmers' Grain Storage.' Thesis-Department of Agricultural Economics and Economics. Montana State University. 1999.
  • Leuck, D. and D.W. Allen. 'The Role of Risk in Contract Choice.' Journal of Law, Economics and Organization Vol. 15 No. 3 (October 1999): 704-736.
  • Leuck, D. and D. W. Allen. 'The Nature of the Farm.' Journal of Law and Economics. Vol. 41 No. 2 (October 1998): 343-386.
  • Leuck, D. and D.W. Allen. 'The Family Farm and Industrialization of Agriculture.' Choices: The Magazine of Farm, Food and Resource Issues 2000, in press.
  • Shaik, S., G.A. Helmers, and J.A. Atwood. 'Farm-Nonfarm Relationships Affecting Farm Size in the Southeast.' Southern Agr. Econ. Assn. Meetings, Memphis, TN Jan. 30-Feb. 3, 1999, abstract forthcoming.
  • Smith, V. (with J.M. Alston, P.G. Pardey) 'Paying for Agricultural Productivity. Johns Hopkins University Press, Baltimore, 1999.
  • Watts, M.J., J.A. Atwood, and S. Shaik. 'Low Risk Farmer.' Staff Paper 2000-5. Montana State University. Department of Agicultural Economics and Economics, January, 2000.


Progress 01/01/98 to 12/31/98

Outputs
A study of the relationship between the rural nonfarm economy and farm structure was continued (Atwood, Shaik, and Helmers). The study demonstrated that the availability of local off-farm jobs decreases the pressure to continually expand farm size. The study also examined the relationship between farm capital investment, distant off-farm wage rates, and the availability of local non-farm wages. Revenue insurance rates were estimated, in various states, for barley, corn, cotton, grain sorghum, and wheat (Atwood and Watts). The process estimates and accounts for regional differences in technologically induced yield trends as well as differences in regional price-yield correlation. Work was started on a congressionally mandated study of FCIC insurance procedures. Work was also initiated examining the effects of units and farm acreage upon insurance losses. A study examining the effects of environmentally induced restrictions of nitrogen was continued (Atwood and Helmers; Atwood, Shaik, Helmers, and Langemeier). Experimental data was used to simulate the effect of reducing nitrogen upon farm risks and returns. Studies were published which examines theoretical and legal concepts of the nature of the farm firm (Lueck).

Impacts
(N/A)

Publications

  • Helmers, G.A., W.Dias, M.R. Langemeier, and J.A. Atwood. Risk Analysis of Cropping Systems Using Experimental Cropping System-Fertilizer Data. Selected paper, Am. Agr. Econ. Assn. meetings, Salt Lake City, UT. August 2-5, 1998 (abstract forthcoming)
  • Helmers, G.A. and J.A. Atwood. Endogenizing Durable Asset Ownership Costs in Linear Programming Models. Proceedings Southeast Decision Science Institute meetings , VA. Febr.25-27, 1998:33-35.
  • Atwood, J.A. and G.A. Helmers. (1998) Effect of Machine-Labor Fixity on Optimum Cropping Decisions. Selected paper, S.Agr. Econ. Assn. meetings, Little Rock, Ark. Febr. 1-4,1998.
  • Selly, R.A., G.A. Helmers, and J.A. Atwood. 1998, Accuracy of a simplified Procedure of Generating Long-Term Costs in Crop Budgets. Selected paper, S.Agr. Econ. Assn. meetings, Little Rock, Ark. Febr. 1-4,1998.
  • Lueck, D., Douglas Allen, The Nature of the Farm. 1998, Journal of Law and Economics, October, Vol. 41. No. 2: 343-386.
  • Lueck, D., Auctions, Markets, and Spectrum Ownership: A Comment on Spiller and Moreton. 1998, Journal of Law and Economics, October, Vol. 41, No. 2, Part 2: 717-726.
  • Lueck, D. Wildlife Law. 1998, The New Palgrave Dictionary of Economics and the Law, in John Newman, ed.
  • Munn, I. A., and Randal R. Rucker, Predicting Forestry Consultant Participation Based on Hedonic Characteristics of Timber Sales. 1998, Journal of Forest Economics, 4(2): 105-125.
  • Atwood, J.A. and G.A. Helmers. (1998) Examining Quantity and quality Effects of Restricting Nitrogen applications to Feedgrains. American Journal of Agricultural Economics. 80(May,1998):369-381.
  • Atwood, J.A., S. Shaik, G.A. Helmers, and M. Langemeier. Impact of Nitrogen Reductions on Risk and Net Returns. Selected paper, Southern Agr. Econ. Assn. meetings, Memphis, TN. Jan. 30- Febr. 3, 1999.
  • Shaik, S., G.A. Helmers, and J.A. Atwood. Farm-Nonfarm Relationships Affecting Farm Size in the Southeast. Selected paper, Southern Agr. Econ. Assn. meetings, Memphis, TN. Jan. 30- Febr. 3, 1999.


Progress 01/01/97 to 12/31/97

Outputs
Accomplishments are addressed by objective. OBJECTIVE 1: To determine optimal financial management strategies for the acquisition and control of agricultural resources. A multiperiod optimization model that examines Montana wheat producer decisions concerning insurance, production and expansion was completed. Procedures to accurately analyze the firm's economic performance over time were developed. A multiperiod optimization model was developed which examines various integer combinations of machinery, availability of tillage days, and alternative crop mixes. A study examining the long-term recovery of Wyoming big sagebrush after various treatments was completed. OBJECTIVE 2: To examine the effects of various governmental programs and economic conditions upon both the short and long-term financial viability of agricultural firms. A comparative static model was completed which examined the relationship between the agricultural firm and the local rural community. A study indicating that the availability of FCIC's GRP area based yield insurance program could be useful to a subset of an area's producers. A book chapter examined the economics of crop insurance. Two studies examined optimal acreage base decisions under the previous farm bill. Two studies examined the effects of various farm program provisions upon the adoption of crop rotations and other "sustainable" cropping practices. Researchers developed rating procedures for the Federal Crop Insurance Corporation's (FCIC) Income Protection reven.

Impacts
(N/A)

Publications

  • EGAN, L.M. and M.J. WATTS, 1997, Forthcoming, "Some Costs of Incomplete Property Rights with Regard to Federal Grazing Permits."
  • GOODWIN, B.K. and V.H. SMITH, 1997, "The Effects of Crop Insurance and Disaster Relief Programs on Soil Erosion: The Case of Soybeans and Corn." Abstract, American Journal of Agricultural Economics,
  • ATWOOD, J.A. and G.A. HELMERS, 1997, "Estimates of Bias and Improvements in Short-Run Programming Models for Cropping System Analysis." Selected paper, Southern Agricultural Economics
  • ATWOOD, J.A. and G.A. HELMERS, 1997, "Examining Quantity and Quality Effects of Restricting Nitrogen Applications to Feedgrains." Forthcoming American Jouranl of Agricultural Economics.
  • HELMERS, G.A. and J.A. ATWOOD, 1997, "Estimates of Capital-Labor Substitution Derived from a Farm Firm Programming Model." Selected paper, Southern Agricultural Economics Association Meetings, Birmingham, AL (Abstract coming) WATTS, M.J. and G. HAYNES, 1997, "Finance Companies and Small Business Borrowers: Does the Pawn Shop Label Fit?" Journal of Small Business Finance, February.


Progress 01/01/96 to 12/30/96

Outputs
A model was developed for a producer with a limited water supply. The model predicts that imposing a surcharge on irrigated land is likely to result in less irrigated acreage but is also likely to increase the intensity of chemical use on the remaining irrigated acreage. Depending upon soil and site characteristics this may result in increased total chemical leaching and environmental contamination. A different study assessed the effects of crop insurance on the use of agricultural chemicals. The results showed that producers who purchased federal crop insurance tend to use lesser amounts of chemicals than do farmers without insurance. An additional study examined the effects of federal crop insurance upon the long term survivability of Montana wheatults showed that producers are likely to adjust their behavior in other areas of their operations to such a degree that overall long term survival rates are largely unaffected by the availability of federal crop insurance. However, the demand for farm credit is likely to be increased resulting in strong creditor support for crop insurance.

Impacts
(N/A)

Publications

  • Atwood, J. etal. "An Examination of the Effects of Price Supports and Federal Crop Insurance Upon the Economic Growth, Capital Structure and Financial Survivability of Wheat Growers in the Northern High Plains." AmJAgEcon, 78(1), Feb. 1996.
  • Irby, Lynn, Walter E. Zidack, James B. Johnson and John Saltiel. "Economic Damage to Forage Crops by Native Ungulates as Perceived by Farmers and Ranchers in Montana." Journal of Range Management, U49(4)375-380
  • Smith, Vincent H. and Alan E. Baquet. "The Demand for Multiple Peril Crop Insurance: Evidence from the Great Plains." American Journal of Agricultural Economics, 78(1):189-201, Feb. 1996.
  • Smith, VIncent H. and Barry K. Goodwin. "Crop Insurance, Moral Hazard and Agricultural Chemical Use." American Journal of Agricultural Economics, 78(2):428-438, May 1996.
  • Watts, Myles J. and C.L. Wambolt. "Long Term Recovery of Wyoming Big Sagebrush."Journal of Environmental Management, 46 February 1996.


Progress 01/01/95 to 12/30/95

Outputs
A procedure to evaluate appropriate CRP bids was developed. An incentive-based model of range stewardship was also developed, to analyze the incentives facing grazing permit holders under changing governmental regulation and fee structure. The resulting paper demonstrated that producers who lose confidence in their future property rights have incentives to more rapidly exploit the resource at the current time. The economic/political environment affecting the confidence in future property rights may well result in environmental degradation. An economic model of sagebrush management was also conducted. A model examining the relationship between farm size and the local economy was developed. The model predicts that the availability of off-farm jobs in the local community will allow the continuation of a smaller farm unit. The absence of such jobs will often result in larger farms and continued off-farm migration.

Impacts
(N/A)

Publications


    Progress 01/01/94 to 12/30/94

    Outputs
    A model of range stewardship was constructed which examines the effects of changing property rights and fees for federal grazing permits. The model predicts that actions which (1) tend to reduce the permitee's confidence about future property rights or (2) increase producers'expected costs, create incentives for excessive grazing before the actions are undertaken. A statistical-simulation model was constructed, which estimates insurance premia for portfolios of crops. The model estimates that premia for jointly-insured crops can be greatly reduced as contrasted to insuring the same crops separately. A Monte-Carlo study was completed which examined the statistical properties of the proposed estimation scheme. Preliminary results indicate that joint crop insurance is a potentially attractive alternative for the Federal Crop Insurance Corporation's consideration.

    Impacts
    (N/A)

    Publications


      Progress 01/01/93 to 12/30/93

      Outputs
      A multiperiod optimization model which examines producers' decisions concerning insurance, production, and expansion was completed. The model incorporates a nonparametric statistical section which estimates conditional price, yield, and interest rates state transition probabilities. Current aspects of the farm program are incorporated as is an endogenously determined credit supply schedule, and a rational model of land markets. The model predicts that firms with histories of financial problems and/or higher leverage are more likely to benefit from insurance than are most farmers. The model also demonstrates that, in most situations, restricting the use of farm debt is more effective than insurance in reducing firm failures. Group or area based insurance is less attractive than individual based multiple peril insurance in most situations. The results of the mathematical model track well with the responses of a survey of wheat producers which was completed during the year. The model's results predict that producers and creditors are likely to resist the FCIC's group insurance program resulting in low participation.

      Impacts
      (N/A)

      Publications

      • WRIGHT, B.D. AND J.A. HEWITT. 1993. Crop Insurance for Developing Countries. In: Food Security and Food Inventories in Developing Countries, Center for Agriculture and Biosciences International.
      • ATWOOD, J.A. 1993. Constant Dollar Financial Statements. Review of Agricultural Economics.
      • ATWOOD, J.A. AND M.J. WATTS. 1993. Bootstrapping Discrete Markovian Transition Probabilities with Complete and Reduced Sets of State Variables. Quantifying Long Run Ag Risks and Evaluating Farmer Responses to Risk. Univ of Maine.
      • HELMERS, G.A., K.J. BERNHARDT, AND J.A. ATWOOD. 1993. Impacts of Commodity Programs on Sustainable Agriculture. WAEA annual meetings, July.
      • HELMERS, G.A., K.J. BERNHARDT, AND J.A. ATWOOD. 1993. Base Building Incentives and the Food, Agriculture, Conservation, and Trade Act of 1990. AAEA annual meetings, August.
      • SMITH, V.H. AND A.E. BAQUET. 1993. The Demand for Multiple Peril Crop Insurance: Evidence from the Great Plains. Montana AgResearch, Spring.
      • SMITH, V.H. AND A.E. BAQUET. 1993. The Demand for Multiple Peril Crop Insurance. American Journal of Agricultural Economics, December.
      • SMITH, V.H. AND A.E. BAQUET. 1993. The Demand for Multiple Peril Crop Insurance. University of Saskatchewan Agricultural Economics Workshop, October.


      Progress 01/01/92 to 12/30/92

      Outputs
      The recent decline in interest rates has focused attention on the economics of refinancing existing debt. A representative situation was used to illustrate a net present value approach to determining the profitability of refinancing debt. The analysis points out that commonly used rules of thumb are imprecise and that the profitability of refinancing depends on, among other factors, the amount of debt and length of repayment contracts. A study was conducted to determine optimal nitrogen fertilizer levels for cereal grains on soils representative of central Montana. This information is necessary to assess the economic tradeoff between economic use of nitrogen fertilizer and nitrate contamination of groundwater. The results with respect to grain yield show: 1) diminishing marginal returns to applied nitrogen; 2) negative interaction between applied nitrate and soil nitrate, which implies an inverse relationship between soil nitrate and the optimal level of applied nitrogen; and 3) the profit function of optimal level for applied nitrogen is quite flat in the area of optimal application of nitrogen: consequently, reductions in applied nitrogen do not result in proportionate decreases in economic returns. The results with respect to grain protein indicate: 1) a positive linear response to applied nitrogen for all crops; and 2) a positive, but diminishing, increase in grain protein as soil nitrate increases.

      Impacts
      (N/A)

      Publications


        Progress 01/01/91 to 12/30/91

        Outputs
        A study was conducted to determine optimal nitrogen fertilizer levels for cerealgrains on soils representative of central Montana. This information is necessary to assess the economic tradeoff involving economic use of nitrogen fertilizer and nitrate contamination of groundwater. The data was generated by experiments involving nitrogen fertilization of barley, spring wheat, and winter wheat grown on fallow and recrop (stubble) at the Central Montana Research Center at Moccasin during the period 1975-83. The results with respect to grain yield show: 1) diminishing marginal returns to applied nitrogen, 2) a negative interaction between applied nitrogen and soil nitrate, implying an inverse relationship between soil nitrate and the optimal level of applied nitrogen, 3) the profit function for applied nitrogen is quite flat in the area of optimal applied nitrogen, consequently reductions in applied nitrogen do not result in proportionate decreases in economic returns to applied nitrogen. The results with respect to grain protein percentage show: 1) a positive linear (constant marginal) response to applied nitrogen for all crops, 2) a positive, but diminishing, increase in grain protein as soil nitrate increased. The final report is nearly completed and the results will be reported in appropriate journals. The conditional probability of rural bank failure was modeled as the restricted dependent variable of a logistic equation.

        Impacts
        (N/A)

        Publications

        • JOHNSON, J.B., A.E. BAQUET, M.S. STAUBER, AND D.W. BULLOCK. 1991. "Commodity and 0/92 Programs: Provision Available for the 1991 Crop Year." Department of Agricultural Economics and Economics. MAES EB 91/MSU.
        • WANG, X. 1991. "Bank Risk Classification and Optimal Regulatory Choice." M.S. Thesis, Department of Agricultural Economics and Economics, MSU.


        Progress 01/01/90 to 12/30/90

        Outputs
        Work in progress includes: (1) Examination of risk-adjusted FDIC premiums charged to commercial banks. Modelling of risk of failure for any given bank will be made;to be used to examine the potential pay-ins to the FCIS compared to currentlevels; (2) Analysis of the agribusiness sector of Montana. Direct survey of agribusiness firms and producers to determine level of contribution to Gross State Product and relative employment contributions to the state. Summarize and analyze changes that have occurred to these firms in the past five years, and prospects for the future. Producer survey will provide information on trade patterns and types of services and products they desire from local agribusiness firms. Information will be summarized and can be uses in management training seminars to improve conditions for agribusiness firms and agricultural producers.

        Impacts
        (N/A)

        Publications

        • ADAIR, A.L. 1990. The Impact of a Sales Tax on Differing Family Sizes. Big Sky Economics, 4th Quarter.
        • ADAIR, A.L. 1990. A Sales Tax: Its Effect on Differing Montana Family Sizes. Montana Farmer-Stockman. November.


        Progress 01/01/89 to 12/30/89

        Outputs
        Ag Finance & Credit: Procedures to analyze real financial & economic performanceof an agricultural firm were completed & indicate that traditional nominal analysis can be misleading if not properly interpreted. Data on consumer expenditures of farm & nonfarm families are being examined to determine if significant differences exist by family size & region of state. Farm & Ranch Management: Exact solutions to probability constrained management problems were contrasted to approximation methods. These methods can be used to examine risky management or environmentally sensitive practices. The response of winter wheat to nitrogen fertilization rates in North Central MT is being examined, as well as response of spring wheat to nitrogen & phosphorous applications. Preliminary analysis has begun on response of cereal grains in Central MT to various sources of nitrogen & the efficiency of their usage. Possible innefficent resource allocations were identified due to federal grazing contract stipulations.

        Impacts
        (N/A)

        Publications


          Progress 10/01/88 to 12/30/88

          Outputs
          (1) Ag Finance & Credit: Models to identify maximal bid prices for assets in thepresence of stochastic returns were developed including firm specific technical, financial & risk attitude constraints. Procedures to reconcile nominal financial statements to reflect the real position of ag producers were also pursued. This change will provide accurate information for use in assessing mgmt performance & firm level decisions. At the macro level, equations were estimated to provide the linkages from federal farm programs between the dairy sector & the rest of the US economy. These linkages account for expenditures on dairy price support operations & the resulting tax revenues that accrue to the federal government. The impact of changes in federal dairy policy on all sectors of the economy as well as net cost to taxpayers can be examined. (2) Farm/Ranch Management: Analysis was begun on spring wheat data to estimate a set of relationships between production inputs & yields, i.e. (a) applied phosphorous to current levels of soil phosphorous; (b) soil phosphorous & applied nitrogen to spring wheat yields & protein content; (c) to use the estimated relationship to determine optimal fertilization policies for hard red spring wheat. Work has been completed which examines replacement decisions for farm machinery & optimal fertilization practices for winter wheat. An examination has been made of the effect of saline seep control on dryland cropping decisions.

          Impacts
          (N/A)

          Publications

          • ATWOOD, J.A., WATTS, J.M. and HELMERS, G. 1988. Chance-constrained financing as a response to financial risk. American J of Ag Econ 70(1):79-89.
          • ATWOOD, J.A., WATTS, M.J., HELMERS, G.A. and HELD, L.J. 1988. Incorporating safety-first constraints in linear programming production models. Western J of Ag Econ 13(1):29-36.
          • SUYDAM, S.L. and ADAIR, A.L. 1988. The federal dairy progarm: Specification of direct & indirect costs of federal farm programs. SP 88-10. Ag Econ & Econ Dept, Montana State Univ., Bozeman. 63p.
          • WEERSINK, A. and STAUBER, M.S. 1988. Optimal replacement interval and depreciation method for a grain combine. Western J of Ag Econ 13(1):18-29.
          • SUYDAM, S.L. 1988. Accounting for federal dairy program expenditures: A macroeconomic approach. M.S. Thesis. Montana State Univ., Bozeman. 73p.
          • BURT, O.R. and STAUBER, M.S. 1988. Dryland cropping decision theory with application to saline seep control. J Production Agriculture. Accept for pub.
          • DU, J.Y. 1988. An economic comparison of control methods of Wyoming big sagebrush in southwestern Montana. M.S. Thesis. Montana State Univ., Bozeman. 60p.
          • RACHMAN, Z.Z. 1988. Exploring alternative measures of net rents to farmland through the economic capitalization formula for farmland price. M.S. Thesis. Montana State Univ., Bozeman. 103p.