Master of Agribusiness / Department of Agricultural Economics / Kevin Gwinner / Under the leadership of the Van Eekeren family, Land O’ Frost has become one of the fastest growing meat processing manufacturers in the United States. “Premium” is Land O’ Frost’s flagship brand which makes up 57% of the company’s total sales dollars. Of the line of Premium lunchmeats, Honey Smoked Turkey is ranked #3 in total sales dollars. However, if you rank the product’s performance by dividing its all commodity volume (ACV) by the number of pounds sold, it is ranked #7 out of the nine single pack flavors offered in retail. There has been internal speculation that the Honey Smoked Turkey’s sales performance is related to a lack of honey/sweetness flavor in the lunchmeat. As a result, Land O’ Frost needed to determine if the current level of honey/sweetness flavor of the Honey Smoked Turkey needs to be increased in order to stimulate higher growth in sales. A third party consultant conducted a consumer test between Land O’ Frost’s honey smoked turkey and their top two competitors’ honey smoked turkey. Based on the results, the Land O’ Frost product was the least likely preferred and was rated as having the lowest sweetness flavor profile among the three products. In an effort to develop a sweeter tasting honey turkey, different test formulations were developed using different honeys, levels of honey and sweeteners. The lighter the honey grade the less flavor impact was present in the turkey. As a result, a test formula containing twice the amount of light amber honey and the maximum amount of sugar was developed to be sweeter and to offer better marketing claims to potentially attract more customers. Due to product process differences between the Land O’ Frost’s honey smoked turkey and its competitor’s, the decision was made to conduct another consumer test between the current control and the newly formulated test product. The data determined that there was not a significant difference between the two products tested. A triangle test was conducted via a third party and it also confirmed the same conclusion. With the test formula having a slightly higher cost per pound than the current control formula, it was decided internally that the test formula could replace the current formula if the test formula price per pound can be adjusted to the same cost as the control. I would recommend that the level of sugar in the new test formula be slightly decreased until the formula cost per pound is the same as the control. The cost of meat raw materials used by Land O’ Frost often changes due to market price conditions. The new formulated honey smoked turkey’s selling potential would still have a positive impact by utilizing claims such as “double the honey” and “lower sodium” on the package. In this case, the selling potential increase would be more heavily executed from a marketing perspective than from flavor development.

Master of Agribusiness / Department of Agricultural Economics / Christine Wilson / Over the last decade, the United States horse industry has seen a decline in all segments of the industry. Both people and organizations within and outside the industry have debated the cause of this decline, with the 2007 horse slaughter ban being at the center of this debate. The purpose of the report is to analyze a specific segment of the industry to determine what has led to this decline over the last decade. To do this, we will look specifically at the total number of thoroughbreds sold over a thirty-year history, and using regression analysis, determine if a controversial bill that banned the slaughter of horses in the United States for the purpose of meat was the cause of this decline or if other key variables that played a key role. These additional variables will include hay prices, corn prices, oat price, gas prices, and a macro economic indicator variable. The regression results show that the horse slaughter ban did in fact have an impact on the decline of the total number of thoroughbreds sold within this specific segment of the industry. Also, both hay and the unemployment rate had an effect on the decline of the total number of thoroughbreds sold, while gas prices appear to have had an unexpected positive effect, which is contrary to common thought. This thesis shed a new light on the decline of the horse industry within the United States and the effect the ban has had on the thoroughbred industry.

Master of Science / Department of Agricultural Economics / Timothy Dalton / Previous research on small-scale farmers in KwaZulu-Natal, South Africa indicates that certain genetically modified maize seed types improve production efficiencies and increase net returns (Regier 2012). Yet despite the substantiated advantages, not all farmers have adopted genetically modified maize. The purpose of this research is to identify the determinants of adopting certain types of genetically modified maize over traditional or conventional hybrid maize for 184 small-holders in two villages in KwaZulu-Natal, South Africa. Previous adoption studies use socioeconomic characteristics of the farmer as well as farm-level production characteristics to determine the probability that a farmer will implement an improved agricultural technology. While many studies employ a binomial approach to adoption, this study tests the probability of adopting three different GM varieties—the insect resistant Bt maize, the herbicide tolerant Roundup Ready® maize, and the stacked trait BR maize. Furthermore, the model is enhanced by farmers’ open-ended explanations of their perceptions on genetically modified maize and of the major production constraints they face. Following results from previous adoption studies, this research tests three hypotheses in a three different model structures. The first hypothesis tests whether farmers are more likely to adopt if they have greater financial means to cover higher expected production costs. This is tested by variables measuring off-farm employment and expected production costs. The second hypothesis tests whether farmers with less labor availability are more likely to choose maize with the herbicide tolerant technology, either the Roundup Ready® or stacked BR maize, which reduce the need for weeding. The final hypothesis is whether there are differences in the determinants of adoption that differentiate GM adopters into three distinct categories. These hypotheses are tested in three model structures that test the binary probability of adopting GM maize over non-GM, the probabilities of adopting each maize variety separately, and the intensity of adoption. The first finding is that many non-adopters have greater access to income and are more likely to sell a portion of their yield than are many farmers who adopted, especially in comparison to those who plant RR maize. Also, BR farmers are more likely to report input expenses as a major constraint in their adoption decision. Results for the second hypothesis show that those who planted either RR or BR maize did in fact have less family labor available, used less total labor, and used a greater proportion of family to hired labor. Finally, there are differences in the determinants for geographic site, education, self-sufficiency in maize supply, number of family members working off-farm, and whether households planned to sell any of their maize yields. This indicates that adoption should be considered according to each genetically modified trait.

Master of Science / Department of Agricultural Economics / Arlo Biere / A major story in the recent history of US agriculture is the evolution and growth of the ethanol industry. A crucial factor in the profitability of an ethanol plant is the choice of its fixed location, as this has implications in the transportation costs associated with the acquisition of grain and sale of distiller’s grains. When the industry was in its infancy, where to locate, often, was based on strictly local factors. Primary considerations were local availability of grain and producer and community investment interests. Today, the ethanol industry is more mature and consolidated. As such, investment criteria have broadened from a localized to a total systems perspective. The focus of this study was to analyze construction, abandonment, and expansion of plant locations in ethanol producing regions, and the effects of regional transportation costs on the geographic growth of the industry. Comparison to previous research provided the basis to evaluate industry change. Current ethanol plant locations and their capacities were complied and compared with earlier data to identify plant exits, expansions and new construction. Aggregating those plant capacities by USDA crop reporting districts, feedstock consumption by biorefineries were calculated by crop reporting district, as was livestock feed demand from livestock numbers. Those data along with coarse grain production by crop reporting district were used to calculate excess feedgrain demand (supply) by region. Those regional data were used to construct linear programming network-flow models for the transportation of feedstock and for DDGS, respectively. Two models were used; the first was used minimize the interregional cost to transport feedstocks from excess supply regions to excess demand regions. The second was used to minimize the interregional cost to transport DDGS from excess supply regions to excess demand regions. These regional transportation costs were combined to find the total interregional transport by crop reporting district. Differences in such interregional transport costs affect the competitiveness of plants across crop reporting districts and should affect the strategic position of each plant location. Current plant locations and transportation cost results were compared with those from previous research and, with additional consideration to changes in production factors, provided further understanding of the recent growth and development of the ethanol industry.

Master of Science / Department of Agricultural Economics / Kevin Dhuyvetter / Land accounts for more than 75% of a farm operation’s total assets and thus knowledge of land values are very important to landowners. However, many other parties, including lenders, appraisers, investors, and researchers also have significant interest in land markets. Over the past few decades, land prices in Kansas have increased significantly for many different reasons. The main objective of this research is to estimate the impact of various factors on Kansas land values using a hedonic regression model. In cooperation with the Property Valuation Department (PVD) of the Kansas Department of Revenue, farmland market transactions from 1986 to 2009 were obtained for this study. Hedonic models were estimated using Ordinary Least Squares to determine the impact of interest rates, urban areas, location, parcel size, and income on nominal and real Kansas land values. The estimated nominal and real models explained 24.1% and 17.2% of the variation in land prices, respectively, and the results from this study are generally consistent with previous research. This research went further into investigating the relationship between PVD data and United States Department of Agriculture (USDA) surveyed data. Results from this study indicate that USDA surveys significantly underestimate the true market for land prices across Kansas.

Master of Science / Department of Agricultural Economics / Ted C. Schroeder / This study focuses on the effects of food safety recalls on a firm’s shareholder value. In this study, the effects of six recalls are studied using the event study method. Three models were used involving the daily stock returns for each recall, the daily prices from the S&P 500 and the S&P 500-Packaged Foods and Meats prices. Each of these models was used to determine the abnormal returns for the individual recalls during a determined event window. The four companies responsible for the recalls are all large, highly-diversified food production companies. Overall, the results from this study show there is short-term effect on shareholder values for the companies included in this study. This is an important topic that was widely studied in the late 1990’s and early part of the 2000’s. There have not been any notable studies in this area in the past decade which is why this study is useful. Results of this study are comparable to those mentioned in the literature review section.

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.