On the policy relevance of agricultural economicsJust, David R
2023 European Review of Agricultural Economics
doi: 10.1093/erae/jbad019
The past decade has seen the transition of agricultural economics from perceived irrelevance to being seen as key to saving the world from an array of grand challenges. These challenges include global climate change, non-communicable diseases, hunger and poverty. These challenges require international cooperation. Such cooperation is undermined by global conflicts in which agricultural trade is disrupted either to incentivise policy change or through conflict. The world is vulnerable if trade can be exploited for political power or disrupted by other actions taken for political power. Agricultural economists are uniquely situated to address these issues.
Digital innovations for sustainable and resilient agricultural systemsFinger, Robert
2023 European Review of Agricultural Economics
doi: 10.1093/erae/jbad021
Digitalisation is rapidly transforming the agri-food sector. This paper investigates emerging opportunities, challenges and policy options. We show that digital innovations can contribute to more sustainable and resilient agricultural systems. For example, digital innovations enable increased productivity, reduced environmental footprints and higher resilience of farms. However, these optimistic outcomes of increasing digitalisation of the agricultural sector will not emerge on their own, but this development comes with several challenges, costs and risks, e.g. in economic, social and ethical dimensions. We provide policy recommendations to explore opportunities and avoid risks. Moreover, we discuss implications for future research in agricultural economics.
The pricing of variance risks in agricultural futures markets: do jumps matter?He, Xinyue; Bian, Siyu; Serra, Teresa
2023 European Review of Agricultural Economics
doi: 10.1093/erae/jbad026
The existence of a negative variance risk premium on agricultural futures contracts suggests that market participants pay to hedge unexpected increases in the volatility of these contracts. In this paper, we decompose the variance risk premium in corn and soybeans markets into jump and diffusive components using options and futures data from 2009 to 2021. We find that market participants on average only pay to hedge unexpected increases in jump volatility but not those in diffusive volatility. Furthermore, growing season uncertainty and the arrival of United States Department of Agriculture (USDA) announcements play important roles in driving the market’s fear of unexpectedly large price jumps.
Commodity price uncertainty and international tradeBakas, Dimitrios; Konstantakopoulou, Ioanna; Triantafyllou, Athanasios
2023 European Review of Agricultural Economics
doi: 10.1093/erae/jbad015
We empirically investigate the impact of commodity price uncertainty on US and Euro Area (EA) trade flows. Our results indicate that the response of US and EA trade flows to commodity uncertainty shocks is larger, in magnitude and persistence, when compared with the respective impact of commodity supply and demand shocks. Moreover, our analysis shows that a one-standard deviation shock in commodity price volatility has a higher (in magnitude) and more persistent effect on trade when compared with the respective shocks in exchange rates and commodity prices. Finally, an uncertainty shock in various agricultural and metals markets has a similar negative impact on trade flows to that of energy uncertainty shocks.
Identifying and assessing intensive and extensive technologies in European dairy farmingLatruffe, Laure; Niedermayr, Andreas; Desjeux, Yann; Dakpo, K Herve; Ayouba, Kassoum; Schaller, Lena; Kantelhardt, Jochen; Jin, Yan; Kilcline, Kevin; Ryan, Mary; O’Donoghue, Cathal
2023 European Review of Agricultural Economics
doi: 10.1093/erae/jbad023
In order to tackle climate change and biodiversity loss, the European Union (EU) promotes extensive farming. However, identifying such farms across countries and assessing their performance for policy purposes remains challenging. This paper combines a latent class stochastic frontier model (LCSFM) with a novel nested metafrontier approach. The resulting model enables the identification of intensive and extensive farms across countries, estimation of farm efficiency and identification of different technology gaps. Based on Farm Accountancy Data Network data of French, Irish and Austrian dairy farms,we find poorer environmental but better economic performance of intensive farms, compared to extensive farms. The largest productivity differences stem from technology gaps and not from inefficiency. The approach enables a more nuanced analysis of sources of inefficiency to assist policy design for future green payments in the EU.
Policy-induced expansion of organic farmland: implications for food prices and welfareMérel, Pierre; Qin, Zhiran; Sexton, Richard J
2023 European Review of Agricultural Economics
doi: 10.1093/erae/jbad024
Public policies increasingly support the expansion of organic agriculture as part of a menu of food and environmental initiatives. A little-studied yet crucial element of such expansion, especially in light of scientific evidence on lower yields of organic crops, is its impact on overall food production and food prices, especially for poorer households. In this paper, we first establish a positive empirical relationship between countries’ propensity to produce and consume organic foods and their per-capita income. Such correlation suggests that, even if rich countries’ consumers can benefit from an increase in the organic farmland share, poor countries’ consumers would likely face higher conventional food prices. We then develop and calibrate a model of world food demand and supply to assess the implications of a policy-driven expansion in organic farmland. Our results for four major grains and oilseeds show that raising the organic cropland share in rich countries from 3 to 15 per cent increases food prices in poor countries by up to 6.3 per cent, with central values of 1.2–2.5 per cent, and a commensurate reduction in consumer welfare. Model parameterisations indicate that farmers in poor countries benefit from higher crop prices, while consumers in rich countries are largely unaffected and sometimes benefit. In all cases, poor countries’ consumers bear most of the distortion burden. In our preferred parameterisation, a 3 per cent increase in cropland in rich countries is needed to offset the food price increase in poor countries.