Doctor of Philosophy / Department of Agricultural Economics / Brian C. Briggeman / U.S. farm profitability is near historic highs. This fact raises many questions related to the economics of production agriculture. Three questions are examined in this dissertation. First, should farmers use a different benchmark for farm profitability? To answer this question, a benchmark of farm profitability is developed that adds balance sheet information to an established benchmark which uses only income statement data. The second and third questions focus on cooperatives since farmers rely on efficient cooperative management to maximize their return on investment in the cooperative and their own farm profitability. How should cooperatives allocate earnings to farmers? To answer this question, a model is developed to inform boards of directors regarding optimal equity allocation decisions. Finally, do cooperatives face agency costs? To answer this question, a variable cost model is estimated to examine the indirect costs of leverage. The first essay used data from Kansas farms to determine the effects of the use of debt on cost efficiency. A nonparametric cost efficiency model was used to examine these effects. Results indicated that farms which were more specialized, had higher capital costs, and used more equity to finance assets experienced larger increases in efficiency when the use of debt was included in the analysis. The second essay used information on effective tax rates and empirically-estimated risk aversion coefficients in a portfolio model to determine the effects of different tax rates on the distribution of earnings. Results indicated that even a large deviation in current effective tax rates is not likely to affect the optimal share of allocated earnings. However, member risk preferences had an economically significant effect on the optimal share of allocated earnings, suggesting that board members focus on understanding member risk preferences. The third essay used data from U.S. agricultural cooperatives to determine the presence of agency costs due to the use of debt. A variable cost function was estimated to generate an index of variable cost efficiency which was used to determine the indirect costs of leverage. A negative relationship between debt and variable cost efficiency was found, indicating that agency costs were present for agricultural cooperatives.

Master of Science / Department of Agricultural Economics / Ted C. Schroeder / The livestock industry is susceptible to several diseases, of which Foot and Mouth Disease (FMD) is one. FMD is neither a fatal nor zoonotic animal disease, but most animals less than one year of age are killed in about 80% of cases. FMD also causes reductions in yield and milk production. FMD is recognized as an economic disease because any outbreak will lead to a drastic reduction in the export market. This study is centered on livestock production in mid-western United States. The study incorporated the result from an epidemiology model into an equilibrium displacement model; this is used to determine the economic impact of the FMD outbreak on both consumers and producers. Three vaccination-to-die scenarios were simulated. Each scenario had 200 disease spread simulation runs. The economic impact results were presented with normal distribution curves in order to see how the economic impacts were distributed across the 200 runs in each scenario. Scenario 14 with 50 and 80 herds vaccination capacity at 22 and 40 days respectively, coupled with 50 km vaccination zone has the lowest negative impact on both consumer and producers. The diseases lasted for shorter period of time in scenario 14 than scenarios 2 and 12. Scenario 14 also has least number of animals killed. It can be concluded from the equilibrium displacement outcomes that the best mitigation strategy for the control of FMD is to have a large vaccination zone area, and increment in the vaccination capacity will also curb the disease on time.

Master of Science / Department of Agricultural Economics / Ted C. Schroeder / In recent years, the agricultural markets have been subject to increased prices and unusual levels of elevated volatility. One likely driver of this is the mandated ethanol expansion in the Energy Policy Act of 2005. Previous research has identified relationships in market prices and variability between the energy and grain markets, but little has been done to evaluate volatility spillover across a broader spectrum of agricultural commodities. Additionally, few studies have assessed causal linkages across market implied volatilities. This research examines implied volatility spillover in futures markets across major agricultural commodities and energies. The analysis also determines the time path and magnitude of volatility translation across the markets and compares the causal relationships between pre-ethanol boom and post-ethanol boom time periods. Granger causality tests are conducted using multivariate and bivariate vector autoregressive modeling techniques, and impulse response functions are employed to obtain time paths of the reactions. Overall, results indicate that strong implied volatility spillover relationships exist between the grain markets and between the live cattle and feeder cattle markets. The analysis also finds that the agricultural markets have evolved from lean hogs being the primary volatility leader in the pre-ethanol boom era to corn being the primary volatility leader in the post-ethanol boom era. Despite a high correlation between crude oil and corn volatilities in the post-ethanol boom time period, the causal linkage between the two commodities’ volatilities may not be as definite as other literature suggests.

Master of Science / Department of Agricultural Economics / Ted Schroeder / Feeder cattle are placed into feedlots at varying weights. This placement weight is the result of procurement decisions by cattle feeders and of marketing decisions by cow/calf and stocker/backgrounder producers. Increased understanding of the behavior of these markets can help both buyers and sellers of feeder cattle make these decisions. Past research has used linear or quadratic variables or interaction variables in order to model the effects of weight on price. This study instead divides the market for feeder cattle into ten distinct subsets which are evaluated independently. The feeder cattle market for four major cattle feeding states in the Southern Great Plains (Nebraska, Kansas, Oklahoma and Texas) was divided into ten subsets, five in each gender. Each of these represent feeder cattle coming to market in a 50 pound weight range, centered upon 525, 625, 725, 825 and 925 pounds. Each of these subsets was analyzed using seven independent variables selected based upon previous research and economic rationale. These variables were the live futures price, previous feedlot returns, feeder cattle inventory, interest rate, feedlot capacity utilization, cost of gain and pasture conditions. The data for these variables were collected from public sources, aggregated into monthly observations and differenced to correct for nonstationarity. Analysis was conducted using ordinary least squares regressions. Results are reported and trends between weight classes discussed along with their implications. Findings support that feeder cattle of different weights are not perfect substitutes and that market and production factors do not influence all weights of feeder cattle the same. In fact, factors which positively and negatively affect feeder cattle price seem to signal that demand for, or in the case of pasture supply of, feeder cattle of a particular weight has changed and that placement price-weight relationships will adjust accordingly.

Master of Science / Department of Agricultural Economics / Aleksan Shanoyan / The purpose of this research is to evaluate and gain a better understanding of the economic feasibility of Kansas farmers growing energy sorghum for biofuel production. The net returns for 11 crop systems that included a no-till or reduced-till option and the rotations involved wheat, grain sorghum, dual-purpose sorghum, and photoperiod sensitive sorghum were simulated in SIMETAR© developed by Richardson, Shumann, and Feldman (2004) using historical data on yields and prices. The price and yield data originates from an agronomic study conducted in Hesston, KS. The biomass yields for the 3 varieties of sorghum are based on experimental work performed in Manhattan, KS. The sorghum biomass prices were obtained from the United States Department of Agriculture Agricultural Marketing Service. Costs for the crop systems are based on the 2014 Kansas State University Herbicide handbook (Thompson et al. 2014), Dhuyvetter, O’Brien, and Tonsor (2014), and Dhuyvetter (2014). The net returns were simulated under five contract scenarios including: a Spot Market contract, a Minimum Price contract, a BCAP Price contract, and 2 levels of the Gross Revenue Guarantee contracts – 60% and 100%. Risk analysis was performed on the simulated net returns through use of the Excel add-in SIMETAR©. Stochastic efficiency analysis was used to evaluate the systems based on the distribution of net returns and risk preferences. The findings are summarized around three important factors influencing farmers’ economic feasibility of growing sorghum for biofuel use: crop systems, risk preferences, and contract specification. Results indicate that the no-till wheat and dual-purpose sorghum crop system without biomass production has the lowest costs and the no-till wheat and photoperiod sensitive sorghum system has the highest production cost. The crop systems that have a no-till option allow for the highest grain and biomass yields. Also, crop systems rotated with wheat are more preferred among producers due to higher net returns. The NTWDPS With system under the BCAP Price contract has the highest net returns and is highest in preference. The findings indicate that the risk aversion does affect the decision to produce sorghum for biofuel, but the effect is not very significant. In terms of contract specification, the results indicate that for Kansas producers, the BCAP Price contract will offer the highest net returns. These findings contribute additional insight on factors affecting Kansas farmers’ economic feasibility of producing sorghum for biofuel and can have important implications for biofuel industry actors and policy makers.

Doctor of Philosophy / Department of Agricultural Economics / Hikaru Hanawa Peterson / Consumers’ food demand has been found to be affected not only by prices and income, but also by their increasing concern about factors like health benefits, animal welfare, and environmental impacts. Thus, many food producers have differentiated and advertised their products using relevant attributes. The increasing demand and supply of differentiated food products have raised questions regarding consumer preferences and producer strategies. This dissertation consists of three essays and empirically examines the egg market to shed light on related issues. The first question that this study aims to answer is whether consumers are willing to pay a premium for livestock and dairy products associated with improved animal welfare. Consumers’ attitude towards such products not only affect manufacturers’ production decisions, but also influence policy makers and current legislations. Using a national online survey with choice experiments, the first essay found that consumers in the study sample valued eggs produced under animal-friendly environment, suggesting incentives for producers to adopt animal welfare friendly practices. In an actual shopping trip, consumers usually need to choose from products with multiple attributes and labels. Studying how consumers with heterogeneous preferences process these information simultaneously and make decisions is important for producers to target interested consumer segments and implement more effective labeling strategies. In the second essay, a different national online survey was administered. The analysis using a latent class model categorized the sample respondents into four classes, and their preferences toward attributes and various label combinations differed across classes. Scanner data, which record actually purchased choices, are an important source of information to study consumer preferences. Diverging from the traditional demand approaches that are limited in studying differentiated product markets using scanner data, this study used a random coefficient logit model to overcome potential limitations and examine the demand relationship as well as price competition in the differentiated egg market. The third essay found that conventional and private labeled eggs yielded higher margins due to less elastic demand and cautioned producers of specialty eggs, which are usually sold at high prices despite their much more elastic demand.

Master of Agribusiness / Department of Agricultural Economics / John Crespi / Hybrid seed corn pricing has increased significantly over the past six or seven years and continues to be a topic of conversation amongst farmers. This issue is also an area of concern for Monsanto. The hybrid corn pricing team at Monsanto is concerned that they price current products at a point to maximize profits while continuing to grow market share. The key is to price at a point that captures all the value of the differentiated products Monsanto offers. The objective for this study is to estimate a demand model for the hybrid seed corn industry. The demand model will allow us to look at many different aspects of the hybrid seed corn industry and also evaluate the own-price and cross-price elasticities. The own-price elasticity is especially important because it will be used to determine if current pricing is revenue or profit-maximizing. A hedonic pricing model was also estimated in this study to complement the demand model. It is important for Monsanto to understand what attributes or traits are significant in pricing and demand.

Doctor of Philosophy / Department of Agricultural Economics / Michael Langemeier / This study focused on the inclusion of risk in efficiency measures to determine its impact on traditional efficiency scores. Previous research and theory suggests efficiency scores will be lower under risk and for risk averse individuals. Risk aversion may deter use of new production technologies and production levels may not be as high as under other risk preferences. Two data sets were used in the analysis. A panel data set of 256 farms from 1993-2010 was used to address the impact of risk measured as variability in outputs and downside risk on efficiency. A separate data set of 258 farms for 2008 was used with a corresponding risk preference score to determine the impact of risk preference on efficiency. The risk preference scores in the sample ranged from 5 to 86 where a smaller value represents stronger risk aversion. Data envelopment analysis was used to construct a nonparametric efficiency frontier and calculate cost- and revenue-based economic, overall, technical, allocative, and scale efficiency measures. Five inputs: labor, crop input, fuel, livestock input, and capital; and two outputs: crops and livestock were used in the analysis. The results focused on cost- and revenue-based economic efficiency. They showed that risk did affect average efficiency scores and is necessary to include in efficiency analysis. The average cost efficiency without risk was 0.6763. It increased to 0.7200 and 0.7018 respectively when cost efficiency was adjusted to recognize variability in outputs and downside risk. The average portion of cost inefficiency explained by variability in outputs was 28.06 percent. Downside risk explained 22.66 percent of cost inefficiency. The average revenue efficiency without risk was 0.7611 and increased to 0.8372 and 0.7811 when revenue efficiency was adjusted for variability in outputs and downside risk, respectively. Variability in outputs explained 42.53 percent and downside risk explained 30.58 percent of revenue inefficiency. The average cost efficiency for the 258 farms was 0.5691 and increased to 0.6043 with the consideration of risk preference scores. The average revenue efficiency was 0.6735 and increased to 0.6987 with risk preference scores. The efficient farms varied across cost and revenue efficiency, and the risk measures used. This lends support to the use of both input-oriented (cost) and output-oriented (revenue) efficiency measures as well as the use of multiple measures of risk.

Master of Science / Department of Agricultural Economics / Timothy J. Dalton / Sorghum bicolor (L.) Moench is a drought tolerant crop able to adapt to hot and dry weather. It has excellent chemical and physical properties, which make it a grain of good quality for processing different types of products. This research is an impact assessment study that estimated the potential impacts of new uses of sorghum by using an equilibrium displacement model. The data used was drawn from interviews developed in July 2011. Using total quantity production, prices, prices elasticities and cost shares 8 potential market scenarios were simulated. Results between countries were similar. Thus, the analysis was applied for both countries. Producers gain when the sorghum flour demand is shifted between $6,000 and $ 30,000. When the feed demand curve shifted the producer benefit was between $3 million and $ 13 million. In the scenario where the sorghum grain curve shifted and the demand curve for feed and sorghum flour, producer net benefit is between $300,000 to $2.5 million. Interpreting these results suggest that increasing yield and promoting sorghum as a substitute of maize for feed and sorghum as a substitute of wheat for sorghum flour can benefit producers while helping them to increase yield.

Master of Science / Department of Agricultural Economics / John M. Crespi / The objective of this analysis is to derive several econometric estimates of the Panzar-Rosse statistic of industry structure in order to determine whether the dried plums market resembles that of a firm collusion (monopoly or tightly structured oligopoly), a hybrid of monopolistic and competitive tendencies (monopolistically competitive), or perfectly competitive. The result of the Panzar-Rosse test is the H-Statistic: the sum of all elasticities of a firm’s total revenue with respect to factor prices focusing on the long run equilibrium. This study looks at data from a previous study conducted by Alston et al (1998) that includes firm level data for three of the participating firms in the dried plums industry from September 6, 1992 through July 7, 1996 and data provided from Sunsweet Cooperative encompassing firm level data from six firm participants from July 20, 2008 through June 13, 2010. Ordinary least squares regression equations were estimated to determine the elasticities of firm level input costs and other exogenous variables. A total of four regression equations per data set were tested in order to compile the necessary information for the formulation of the Panzar-Rosse H-Statistic. Adjusting for econometric concerns, overall the results show an H-Statistic commensurate with that of an industry that is operating as monopolistically competitive. In examining the evolution of firm-level changes from the time period of the first data set to that of the second, the results suggest the industry, while remaining monopolistically competitive, has also become more competitive; a finding consistent with the decreased concentration noted in the industry over time.