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Master of Agribusiness / Department of Agricultural Economics / Allen M. Featherstone / The cost of energy is a major concern for the United States and its citizens. With domestic demand at all time highs, the need for renewable fuels has become a key in reducing our countries reliance on imported energy. It is important for the U.S. to examine the feasibility of producing its own energy from renewable resources that can be grown domestically. Along with the potential financial gains from renewable fuels, the ability to control the supply of energy for the U.S. is also very important. With the amount of oil imported by the U.S., the ability to produce more of our nations needs and not be forced to rely on other countries could be important for our country moving forward. With the political unrest in many oil producing areas, the security of energy independence is a goal for the U.S. This study uses United States Department of Agriculture, Pro Exporter, Advance Trading, and other statistical sources to analyze the economic feasibility of an ethanol plant near Des Moines, IA. It looks at the available supply of corn in the area as well as the production of ethanol and distillers grains. An increase in the price of imported oil does not necessarily results in an economically viable ethanol plant. Many variables go into the economic viability of an ethanol plant and consumers will still buy the low cost good, and that may be imported energy. Some of these variables affecting economic viability include corn price and availability, denaturant price, natural gas price, ethanol demand and distillers grains demand. With the push for cleaner air and a cleaner environment, ethanol is also used as a gasoline additive to reduce emissions. As more states regulate a higher inclusion rate of ethanol, this will continue to create greater demand. A 100 million gallon ethanol plant is an economically viable investment in the Des Moines area, but when looking at the sensitivity tests, the better investment option if investors want to enter the ethanol industry, is to buy an existing ethanol plant.

Doctor of Philosophy / Department of Agricultural Economics / Vincent R. Amanor-Boadu / This dissertation is composed of two essays in applied microeconomics. Using farm level data, the first essay applied nonparametric methods to test the adherence of individual farm’s production choices to profit maximization objective. Results indicate that none of the farms consistently satisfy the joint hypothesis of profit maximization. The study took into account the uncertainty prevalent in agricultural production by systematically modeling the optimization behavior of farms. Departures of observed data of individual farms from profit maximization objectives were attributed more due to stochastic influences caused by output production decisions than input use decisions. Results also support the existence of technological progress during the study period for Kansas farms. At an alpha level of 5%, assuming both input and output quantities as stochastic, only 5.3% of the farms violated the joint hypothesis of profit maximization with standard error exceeding 10%. Whereas when only input quantities are considered stochastic, a total of 71.73% and 2.09% of the farms had minimum standard errors of greater than 10% and 20% respectively required for the joint profit maximization hypothesis to hold. When only output quantity measurements were assumed as stochastic, a total of 80.10 % and 18.84 % of the farms had minimum standard errors of greater than 10% and 20% respectively required for the profit maximization hypothesis to hold. The second essay examines the demand for alcoholic beverages (beer, wine and distilled spirits) for the U.S. using time series data from 1979-2006. The estimation is done using an error correction form of the Almost Ideal Demand System . Results indicate that there is a significant difference between short run and long run elasticity estimates. The paper addresses the exogeneity of log of prices and log of real expenditures. For the beer and wine equations, the hypothesis of joint exogeneity of price index and real expenditure cannot be rejected at all the conventional levels of significance. For the spirits equation, the tests strongly reject the simultaneous exogeneity of price index and real expenditure. When independently tested, price index appears to be endogenous variable where as real expenditure seems exogenous variable. Based on these results, the real expenditure was considered as an exogenous variable, where as the price index for spirits as an endogenous variable.

Master of Agribusiness / Department of Agricultural Economics / Allen M. Featherstone / This thesis focuses on the rapid growth of new generation contracts used by grain producers. Specifically, the research studies a potential customer base of producers not using Cargill’s new generation contracts. A survey was conducted to uncover possible customer demand for Cargill’s marketing solutions. Those surveyed do not have the opportunity to use these solutions because their operations typically lay outside the footprint of existing Cargill grain facilities. With Cargill’s Flex Delivery Program, sales professionals have the ability to sell grain marketing solutions, like new generation contracts, to farming operations outside of existing asset footprints. From the experiences of current sales professionals offering new generation contracts via Cargill’s Flex Delivery Program, the author hypothesized that there are three primary variables influencing the likelihood of a customer finding value in the Flex Delivery Program. The size of farming operation, the number of facilities they deliver grain to and the importance they place on forward marketing are critical components to determining if a farming operation may market grain through Cargill’s Flex Delivery Program using a new generation contract. The survey results revealed the percentage of the sample population fit the criteria of a Flex Delivery candidate. The survey questions were also designed to uncover farmer demographics, current marketing styles, competition, and, in general, provide good background information useful for making follow-up sales calls on those selected to survey. The results show roughly a third of those surveyed are Flex Delivery candidates.

Master of Agribusiness / Department of Agricultural Economics / Michael R. Langemeier / This thesis was written for the purpose of looking at the feasibility of operating a prospective business; a farm and ranch in southern Idaho. For practical reasons, I looked at a specific farm consisting of 600 irrigated acres, which are irrigated via 5 center pivots. Attached to the farm is an additional 400 acres of pasture ground seeded to crested wheat. In conjunction with operating the farm, I examined the feasibility of leasing a 300 head commercial cow herd from a separate owner than the land owner. Summer pasture for the cows would be leased from a grazing association located in northern Nevada and winter feed would come from the farm pasture, crop aftermath located on the farm, and corn stalks from a neighboring farm. Crops looked at being produced were grain corn and alfalfa hay. Operating cost projections were made using current market values, while the price received for each commodity is based on ten-year historical prices. Historical prices were used to determine whether the business is viable in the long-run. Rent on the farm is based on a 60/40 percent crop share of which the land owner’s share is 40 percent. Lease payment for the cow herd is based on a 2/3, 1/3 calf crop split of which the cow owner’s share is 1/3 of the calf crop. After analyzing the operation’s financials the business is not feasible.

Doctor of Philosophy / Department of Agricultural Economics / Allen M. Featherstone / Bryan W. Schurle / The reliability of nine software packages using the maximum likelihood estimator for the logistic regression model were examined using generated benchmark datasets and models. Software packages tested included: SAS (Procs Logistic, Catmod, Genmod, Surveylogistic, Glimmix, and Qlim), Limdep (Logit, Blogit), Stata (Logit, GLM, Binreg), Matlab, Shazam, R, Minitab, Eviews, and SPSS for all available algorithms, none of which have been previously tested. This study expands on the existing literature in this area by examination of Minitab 15 and SPSS 17. The findings indicate that Matlab, R, Eviews, Minitab, Limdep (BFGS), and SPSS provided consistently reliable results for both parameter and standard error estimates across the benchmark datasets. While some packages performed admirably, shortcomings did exist. SAS maximum log-likelihood estimators do not always converge to the optimal solution and stop prematurely depending on starting values, by issuing a ``flat" error message. This drawback can be dealt with by rerunning the maximum log-likelihood estimator, using a closer starting point, to see if the convergence criteria are actually satisfied. Although Stata-Binreg provides reliable parameter estimates, there is no way to obtain standard error estimates in Stata-Binreg as of yet. Limdep performs relatively well, but did not converge due to a weakness of the algorithm. The results show that solely trusting the default settings of statistical software packages may lead to non-optimal, biased or erroneous results, which may impact the quality of empirical results obtained by applied economists. Reliability tests indicate severe weaknesses in SAS Procs Glimmix and Genmod. Some software packages fail reliability tests under certain conditions. The finding indicates the need to use multiple software packages to solve econometric models.

Master of Science / Department of Agricultural Economics / Hikaru H. Peterson / This study investigates consumers’ preferences for organic baby meals. The growth of the U.S organic industry has been notable during the last two decades. The U.S. organic farmers do not produce enough quantity to meet the increasing U.S demand for organic food, and increasingly more organic foods are manufactured from organic ingredients produced outside the U.S. Tensions have emerged in the organic sectors as large-scale companies have seized opportunities to sell products differentiated with the organic label. The study aimed to estimate U.S. consumers’ willingness to pay (WTP) for selected attributes (type of brand, production attributes, and origin of ingredients) of baby meal products using a choice-based conjoint analysis. The organic offerings represent a nontrivial share of this market. In recent years, offerings under store brands have also been increasing. The study identified that consumers preferred a major national brand with a large market share such as Gerber (80%) to the other types of brands including store brands. In terms of product characteristics, pesticide free and non-GMO products were seen as consumers’ top priorities. Consumers would not buy products that did not exhibit these two characteristics. Minimally processed products seemed not to matter for the majority of consumers, and these products (sold frozen) were expected to be a niche market. Besides, a product made with U.S ingredients (organically or non-organically grown) was associated with a higher utility. Firms can run a cost-benefit analysis to see if sourcing U.S. ingredients could increase profit. Running experimental auctions are recommended to firms that want to elicit WTP for U.S grown ingredients and implement an efficient marketing strategy. This study is a preliminary analysis that highlighted consumers’ preferences in the baby food market, and future analysis would complement the findings.

Master of Science / Department of Agricultural Economics / Michael A. Boland / The 2002 Farm Bill Rural Development Title created new programs to encourage the development of businesses designed to convert commodities to value-added products. This thesis identifies determinants of business development success for Value-Added Producer Grant (VAPG) recipients. Success is categorized in nine different stages of development:(1) creation of an idea, (2) formation of the idea into a written plan as a feasibility study, business plan, or marketing plan, (3) formation of an organizational structure for the idea, (4) the hiring of a manager or employees for the idea, (5) raise capital for the idea through equity drives, (7) creation of the idea into a product in a facility, (8) distribute and sell the product, (9) and whether the product was being sold in March of 2006. The data involves information on 621 grant recipients. Two econometric models are used to evaluate the data. The number of USDA Rural Business and Cooperative Employees, the value-added producer grant amount divided by the number of producers in the organization, the 2006 organizational sales divided by the number of producers in the respective organization, and the total production of the organization divided by the national production of the respective crop were significant variables. These four size variables had a negative impact on an organization being in steps one though eight, but a positive impact on being in step nine, which was the successful stage of business development. (such as dairy, flowers, fruit, nuts, specialty meats, wheat, and wine were positively associated with successful VAPG grant recipients. Illinois, Kansas, Minnesota, Missouri, and Wisconsin had significantly greater odds of success in business development also.