A Re-Examination of Multistage Economies in Hog Farming

Current trends in the structure of hog production in the U.S. are toward facilities that are not only larger, but also more likely to be specialized, carrying out only some of the vertically linked phases of production in the same facility. This paper investigates the cost efficiency incentives for these changes by estimating a multistage cost function for hog production. Data are from the Hog Production Practices and Costs portion of the USDA’s 2004 Agricultural Resource Management Survey.

Does federal crop insurance lead to higher farm debt use? Evidence from the Agricultural Resource Management Survey (ARMS)

Purpose – The purpose of this paper is to consider how the federal crop insurance (FCI) program influences farm debt use, one of the key financial decisions made by farm operators. Design/methodology/approach – Using data from the nationally representative Agricultural Resource Management Survey, the paper implements a propensity score matching model of the impact of FCI participation on various measures of farm business debt use. To account for the simultaneity of financial decisions, the paper further tests this relationship using a seemingly unrelated regression model. Findings – FCI participation is associated with an increase in use of short-term farm debt, but not long-term debt, consistent with risk balancing behavior and current trends in the farm sector. Research limitations/implications – In addition to risk balancing, the results are also consistent with credit constraints or lender preferences. The paper cannot fully establish causality between crop insurance participation and short-term debt levels. Future research should address these limitations. Practical implications – Agricultural lending standards are generally conservative and the farm sector as a whole currently has historically low leverage, which implies that an increase in debt use may not be a threat to the financial health of the farm sector. Social implications – The results indicate that the reduction in total risk facing the farm sector is significantly less than the decline in risk provided by FCI, which is an important consideration for policymakers. Originality/value – This is the first paper to use an econometric model to analyze the relationship between FCI and farm debt use decisions. This paper can inform future research on the FCI program and farm financial decisions.

AN IDENTIFICATION APPROACH OF TECHNICALLY EFFICIENT CATEGORY FOR CONTROLLABLE, CATEGORICAL FACTORS IN PRODUCTION AND AN APPLICATION TO A PRODUCTION PROCESS

This paper suggests a new DEA-based approach to the identification of the efficient category value for controllable categorical factors when controllable categorical factors are involved in the DMU's production process. Though the main objective of this approach is to identify the efficient category value for nonhierarchical categorical factors, it can also be employed to identify the efficient category value for hierarchical categorical factors without any large adjustment. This new approach is applied to an empirical data from an Agricultural Resource Management Survey for soybean production in Pennsylvania. The result of the empirical application illustrates how our approach leads us to the efficient category value of categorical factors by using both radial measure and nonradial measure. Moreover, it shows us the existence of substantial heterogeneity in the use of categorical factors and the opportunity of improvement in DMUs' selection of category value for categorical factors.

Market Power in Poultry Production Contracting? Evidence from a Farm Survey

The exercise of market power by broiler processing firms (integrators) is plausible because local markets for growers are concentrated and because growers face hold-up risks arising from substantial investments in specific assets set against limited integrator purchase commitments. This article explores the links between local integrator concentration and grower compensation under production contracts using data from the 2006 broiler version of the USDA's Agricultural Resource Management Survey. Results of this study, which account for characteristics of the operation and specific features of the production contract, suggest that greater integrator concentration results in a small but economically meaningful reduction in grower compensation.