Transcript NJ Research ProjectsPres - Department of Agricultural Economics

Research Projects:
A Summary of Objectives,
Procedures, and Findings
By
Dr. Shida Henneberry
Professor of Agricultural Economics
Oklahoma State University
[email protected]
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A Summary of Objectives,
Procedures, and Findings
• International Development
• International Trade
• Food Marketing and Demand Analysis
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International Development:
• Economic and Social Impacts of NAFTA
in Mexico
• Industrial – Agricultural Interactions in
Pakistan
• Linkage between Ag. Exports and
Economic Growth
– Pakistan
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Economic & Social Impacts of
NAFTA in Mexico
NAFTA Concerns:
U.S.: American unskilled labor are not able to
compete against Mexican labor
Mexico: Small manufacturers and agriculturalists
unable to compete against large American &
Canadian firms
Canada: The impact on traditionally subsidized &
protected
–Employment sector
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Economic and Social Impacts of
NAFTA in Mexico
Objective:
To evaluate the impact of NAFTA on
peasant welfare in five rural villages in
Traxcala, Mexico
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Economic and Social Impacts
of NAFTA in Mexico
Procedures:
• Comparative Static Analysis
• Linear Programming Model of
Household Production System
• Incorporating expected Post-NAFTA
changes in Agricultural Prices and
Industrial Demand for Labor
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Economic and Social Impacts
of NAFTA in Mexico
Results:
• Inequitable distribution of NAFTA
changes across:
– Genders
– Producers with varying resource bases
• Increased industrial demand for labor
has injected additional income
– Offsetting losses caused by Ag. Prices
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Industrial – Agricultural Interactions
- Pakistan
Objective:
To analyze the relationship between
Pakistan’s industrial and agricultural
sectors. The relationship between cotton
production & industrial growth.
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Industrial – Agricultural Interactions
- Pakistan
Pakistan:
1. Semi-industrialized
2. Heavy dependence on Ag
3. Policy makers face major ag. policy
reforms in quest for industrial development
4. Much of Pakistan’s industrial growth has
been funded at the expense of the
agricultural sector.
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Industrialization has been
successful in GDP Growth
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Industrial – Agricultural Interactions
Procedure:
Econometric Analysis of the growth rate in:
Agricultural GDP
Industrial GDP
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Industrial – Agricultural Interactions
Results:
• Both sectors (Agricultural & Industrial)
have benefited from their relationship
• The industrial sector has gained more
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Industrial – Agricultural Interactions
Conclusions:
• Agricultural growth and rural development
should be given top priority
• Their growth helps the industrial sector
grow even faster
• Ag. Development does not have to be
abandoned in order to focus resources on
industrial development
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Linkage Between Ag. Exports and
Economic Growth
Objectives:
The relationship between Agricultural
exports & economic growth in Pakistan
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Linkage Between Ag. Exports and
Economic Growth
Procedures:
Econometric estimation of three
simultaneous equations on:
GDP
Ag. Exports
Total Imports
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Linkage Between Ag. Exports
and Economic Growth
• Independent variables:
Income remittances form abroad
Investment
Manufactured exports
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Linkages Between Ag. Exports &
Econ. Growth
Findings:
A favorable relationship exists between
agricultural exports & growth in GDP
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International Trade
• Wheat Export Market Development:
– A case study of Oklahoma Direct Shipments to
Mexico
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Economic Analysis of
Unit-train Facility Investment
Shida R. Henneberry, Professor
Haerani N. Agustini, Graduate Assistant
Department of Agricultural Economics
Oklahoma State University
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INTRODUCTION
 NAFTA has increased grain trade
between the U.S. and Mexico.
 Oklahoma is among the largest
producers of Hard Red Winter
Wheat.
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Quality Characteristics
Demanded by Mexican Buyers
are Changing:
Changes in
consumption
patterns in
Mexico
Advances in
milling & baking
technologies
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In recent years, there have been
direct shipments of wheat from
Oklahoma to Mexico.
Suppliers are Oklahoma
farmer-owned
cooperatives/elevators.
Buyers are Mexican Millers.
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Benefits of Direct Shipments:
To Buyer
 Identity-Preservation
 Availability of processed-based
information (e.g. Non-biotech)
To Sellers
 Price Premiums
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IP Marketing Arrangement is
Attributed to:
 Diversification/specialization in
production
 Technological advancements in
processing/marketing
 Sophistication in consumer demand
 Low commodity grain prices
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Typical Grain Transportation Network
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Shipping via Direct Shipment
Involves:
 No other stops at other elevators
 No co-mingling of wheat from the
specific source (that meets buyer
specification) with wheat from other
sources (that may not meet
specification).
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Transportation Structure
Involved in Direct Shipments:
Single-car trains (1-24 cars)
Multi-car trains (25-49 cars)
Unit-car trains (50-99 cars or more)
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Unit-Car Train Benefits:
Rate Savings because of
reduced:
Loading/unloading time
Switching time
Waiting time per car
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Unit-Car Train Costs:
Larger investment in load-out
facility (several mil. $’s):
[unit-trains are on a strict
schedule]
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Objective
The objective of this
study is to calculate
the financial returns to
investment in unittrain facilities in
Oklahoma for direct
shipment of wheat to
Mexico.
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Sources of Data
 Fixed investment cost
of unit-train (100+
car) structures from
Oklahoma elevators.
 Annual operating
costs were adapted
from Vachal, et. Al
(1999)
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Methods of Analysis
Three methods were used to evaluate
the profitability of investment in a
unit-train facility:
1. Net Present Value (NPV)
2. Benefit-Cost Ratio (B/C)
3. Return-to-Investment (RTI) or
Internal-Rate-of Return (IRR)
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Methods of Analysis
Total Benefit:
B = Q (PIP- PTR) + Q (TS)
B
is the difference between total revenue from selling
wheat through direct shipments (IP wheat) and
selling through the traditional channels, at the
elevator’s posted price (terminal market price)
Q is quantity of wheat available for shipment
PIP is the price received from Mexican miller
PTR is the terminal market price
TS is the transportation savings per bushel from using
a unit-train
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Net Present Value (NPV) of
Investment is Calculated as:
NPV 
N

t 1
Bt  Ct
t
(1  i )
Bt is as defined before, in period t
Ct is the cost of investment in unit-train, in period t,
first year is the cost of investment, the remaining
periods is the annual operating cost.
i is the discount rate and N is the number of years
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the investment lasts.SH, Feb 2004
Return-to-Investment
Internal Rate of Return (IRR) or
Return-to-Investment is the
discount rate i that sets NPV = 0.
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Base Cost:
 Cost of unit-train Investment : $3,000,000
(Investment on unit-train load-out facilities)
 Annual operating costs: $1,090,000
Fixed Costs +Variable Costs
 Quantity of wheat transported per year: 10,000,000
bushels
 NPV, BC, and RTI are calculated at:
3%, 5%, 10%, 15%, 18% and 20%
Transptn saving is assumed to be $.10 per bushel
Price premium are assumed at $.05, $.08, and $.11
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Results
NPV
The present value of the net return to
investment in load-out facility are
calculated for:
Various discount rates
Price premiums
Transportation savings
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Conclusions:
The results show that assuming a price
premium of 5 cents per bushel, a discount
rate of 3 percent, and transportation cost
savings of 10 cents per bushel, the netpresent-value is a positive number and
benefit-cost ratio is 1.01.
Moreover, at discount rates above 3
percent, calculations show that present
value of costs exceed the present value of
benefits.
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Conclusions: (continued)
The financial return-to-investment (RTI)
assuming base level costs, is around 3.8 percent;
which is slightly above the current U.S. market
discount (long-term interest) rate.
Results were also calculated for a 10
percent increase in variable costs. Under this
scenario, the net-present-value becomes negative
at 3 percent discount rate; the benefit-cost ratio
remains around 1.00, while the RTI decreases to
1.78 percent.
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Thank you
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Food Marketing and
Demand Analysis
Food Safety
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AN ANALYSIS OF THE
IMPACT OF FOOD SAFETY
CONCERNS ON FOOD
CONSUMPTION
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Objective:
To Evaluate the Impact of:
•Prices
•Expenditure
•Consumer food safety concerns
On food consumption of major food
products in the U.S.
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Major Food Groups Studied:
•Poultry
•Red meats
•Dairy products
•Fresh produce
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The Hypothesis to be Tested:
The net negative info. w.r.t.
•Chemical residues
•Salmonella
•BST
•Growth hormones
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The Model:
The Linear Approximate of an Almost Ideal
Demand System:
Wi   i 
n
C
k 1
ik
log Pk   i log( Y / P )
lnP =  j Wjt-1lnPjt
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Results:
Compared to food safety concerns,
prices and expenditure exhibit a
greater and statistically significant
impact.
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THE END
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