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.

Master of Agribusiness / Department of Agricultural Economics / Allen M. Featherstone / During the past 10 years, ethanol production in the United States has grown exponentially. From 2000 to 2009 U.S. ethanol production increased from 1.6 billion gallons annually to 10.8 billion gallons annually. In 2010, U.S ethanol production increased by 23 percent from 2009 to 13.23 billion gallons. The increase in ethanol production was due to lawmakers reacting to skyrocketing oil prices by implementing a Renewable Fuels Standard (RFS) in 2005 and expanding the RFS in 2007. The RFS requires the use of specified amounts of biofuels, such as ethanol, through the year 2022. The creation of the RFS represented a step beyond lawmakers’ usual policy of using the tax code to promote ethanol production. There is a long history of encouraging ethanol production by using the tax code, but the implementation of a biofuels mandate is new and therefore there is not a great deal of research on the effects of such a policy. This study analyzes U.S. oil, unleaded gasoline, corn and ethanol prices dating back to 1985 to determine the impact that the RFS has had on corn prices. The key question answered is whether the creation and expansion of the RFS has brought the instability of the oil market into the corn market. The prices that an ethanol plant in western Kansas paid for the grain it used to produce ethanol and the price that the plant received for the ethanol that it produced are also analyzed. The plant began operation in January 2004, so it is possible to analyze the grain and ethanol prices both before and after the implementation and expansion of the RFS. To study the impact of the RFS creation and expansion, the prices were analyzed to see if there was an increase in the correlation after the creation and expansion of the RFS. Regression analysis of the national corn prices and the prices that Western Plains Energy paid for the grain that it used to produce ethanol; and regression analysis of the national price of ethanol and the price that Western Plains Energy sold its ethanol for were also used to study the impact of the RFS. Finally, the vector autoregression (VAR) model is used to analyze the dynamic relationships between the variables in the system: corn price, oil price, ethanol price and unleaded gasoline price. The analysis of the correlation reveals that both at the national and plant level grain and oil prices track much more closely together after the creation and then expansion of the RFS. The VAR reveals that there is some relationship between corn and oil prices contemporaneously. The correlation matrix of residuals reveals that there is not a strong correlation between national corn and oil prices. The results suggest the need for greater research in this area. The creation and expansion of the RFS represented a step into uncharted territory and the consequences are still not known.

Master of Agribusiness / Department of Agricultural Economics / Michael R. Langemeier / The cattle market has drastically changed over the last half century. Today, ranchers and farmers are faced with various governmental regulations as well as fluctuating grain and fuel prices. While beef may still be a commodity, it can be sold in specialized markets, in markets that have enhanced consumer demand. It is nearly impossible for a producer with a small herd to compete with a larger ranch if they are selling their cattle as a commodity. The primary economic objective of the producer is to generate revenue. Producers must be profitable to remain in business as well as provide a livelihood for their family. Providing a quality product is part of the business model. Choice within a marketplace is beneficial for producers and consumers. That said forage-fed beef will prosper in marketplaces where consumers desire their product more than alternate products. If producers are intent on progressively growing their market share, Georgia-grown, forage-fed beef must be marketed correctly. This includes promoting it on a basis of locally grown, pasture raised, and other attributes consumer’s desire. The results of the marketing survey present data that may be helpful when marketing Georgia-grown, forage-fed beef. The weekly consumption of beef products provided insight into the potential scope of the market. Approximately 39 percent of respondents consumed beef products three or more times per week. Additionally, 43 percent of the respondents were not familiar with forage-fed beef. This is a significant share of the market that is possibly open to a new product like Georgia-grown, forage-fed beef. Similarly, traceability of the product was an important feature that customers preferred. In addition to a larger selection of naturally produced beef products, respondents also indicated they were willing to pay more for the product. Approximately 49 percent of the respondents indicated that they would be willing to pay up to a dollar more per pound for Georgia-grown, forage-fed beef. Another 30 percent of the respondents indicated that they would be willing to pay more than $1 per pound for Georgia-grown, forage-fed beef. The results of the survey appear to offer opportunities for producers of Georgia-grown, forage-fed beef to expand their market share.

Master of Science / Department of Agricultural Economics / Kevin C. Dhuyvetter / The 2008 National Stocker Survey defines the backgrounding/stocking of cattle as ―operations where calves are grown after weaning and/or preconditioning but before the feedlot. This includes calves purchased for this purpose as well as those retained by cow-calf producers post-weaning, but before marketing or retention through the feedlot. Backgrounding offers many benefits to farmers including, but not limited to, adding value to their feedstuffs—hay, grain, etc.—by feeding it to their cattle and potentially spreading risk by increasing marketing time or engaging in contracts with feedlots. However, producers also take on increased costs as it takes more time to wean, bunk-train, vaccinate, etc. compared to other operations in the cattle industry. This thesis attempts to analyze two studies using the 2008 National Stocker Survey. The first is how producer and operation characteristics—producer age, type of operation, income derived from backgrounding—relate to why producers find variables such as cattle prices, animal health management, marketing practices, and nutrition important. The second is how producer and operation characteristics relate to producers that use futures market contracts and options on futures. Binary and ordered logit models were used to find the statistical significance of the aforementioned studies.Since this survey was specifically designed to profile the stocking/backgrounding industry, some of the estimated models did not add a lot of value beyond the summary statistics for the various dependent variables. That is, the ordered logit models did not identify any strong relationships given that almost all of the producers that responded to these questions found feeder cattle prices, animal health management, marketing practices, and nutrition very important, which can be seen by analyzing the summary statistics. In addition, the binary logit models that were used for the futures market contract and options on futures models, found that the best way to pinpoint producers using either futures contracts or options was if producers were already using risk management strategies. Therefore, the survey’s purpose of profiling the stocker industry may be its best use.

Master of Science / Department of Agricultural Economics / Kevin C. Dhuyvetter / Structural change within the industry, improved management, and volatility in commodity markets are reasons to evaluate and monitor the dairy industry in the future. The dairy industry has shifted concentration of production between regions over time. The Southern High Plains region, including the states of Colorado, Kansas, Oklahoma, New Mexico, and Texas, has undergone cow inventory growth in the past ten years. Dairies have become more concentrated, management has become more refined, and the commodity markets have become more volatile. Education and tools are readily available to producers with issues on reducing production, animal health, and feed losses. Financial risk is a key area producers have limited knowledge and resources. Mitigating this risk is essential in today‟s marketplace to maximize gains and margins as well as create opportunities for the operation to succeed and be financially sound. There are several resources which approximate returns based on either a point in time reference or complete user input. This study allows users to reflect on 21 years of historical data, 1990-2010, as well as plug in their own data or use default market data to estimate projected returns over the next 12 months. This study also builds a modeling framework that will allow historical dairy returns to be estimated and future returns projected on a regular basis. Over time average herd size has grown to reduce cost per head and producers are more efficient, milk production per cow has increased to over 70 pounds per day. Historically prices have increased over time, but the spread between highs and lows has escalated. This model solidifies that milk price and production are key revenue drivers while feed, replacement costs, and labor are large cost components at 39, 17, and 6 percent, respectively. Additionally, changing market prices can intensify the gain or loss an operation will incur over the short term, the projection model shows 2011 just below breakeven due to strong commodity markets. Dairy operations in the Southern High Plains region have shown positive returns in 108 of 252, 43 percent, months with greatest negative annual returns 2006 and 2009.

Doctor of Philosophy / Department of Agricultural Economics / Ted Schroeder / This dissertation empirically examines how demand-enhancing activities conducted by food industry participants affect retail beef steak pricing, consumer demand for ground beef, and industry concentration. It follows the journal article style and includes three self-contained chapters. Chapter 1 uses a two step hedonic model with retail scanner data of consumer beef steak purchases to determine if there are incentives to identify certain attributes and to determine what types of attributes entertain price premiums and at what levels these premiums exists. Results indicate that most branded beef steak products garnered premiums along with organic claim, religious processing claim, and premium steak cuts. Factors influencing brand equity are new brands targeting emerging consumer trends, brands with regional prominence, and those positioned as special-labels, program/breed specific, and store brands. Chapter 2 reports tests of aggregation over elementary ground beef products and estimates composite demand elasticities. Results suggest consumers differentiate ground beef according to lean percentage (70-77%, 78-84%, 85-89%, 90-95%, and 96-100%) and brand type (local/regional, national, store, and unbranded). The range in composite elasticity estimates shows the value of analyzing demand elasticity based on differentiation and not simply considering ground beef as being homogeneous. Composite elasticity estimates provide improved understanding of how consumers make decisions concerning ground beef purchases. Chapter 3 examines industry concentration for the U.S. food manufacturing sector. This study is the first to examine whether particular subsectors within the food manufacturing industry, which operate in the presence of industry-funded check-off programs such as marketing orders, are more or less concentrated than industries without such research and marketing programs. Results provide evidence to support the hypothesis that industries with demand-enhancing check-off programs have lower concentration relative to industries without these programs.