Barry Goodwin - Academia.edu (original) (raw)
Papers by Barry Goodwin
This paper examines the cross-hedge ratio between grain sorghum spot prices and corn futures pric... more This paper examines the cross-hedge ratio between grain sorghum spot prices and corn futures prices. Cross-hedging is used when two products are substitutes, and one does not have a futures market. A copula model with GARCH errors is applied to estimate the optimal hedge ratio. Hedging performance is measured by the reduction in the variance of portfolio. Results show that application of a copula model reduces risk more than the conventional method, such as an OLS model and a multivariate GARCH model.
We use a large sample of Kansas Farm Management Association farms for eight different crop/practi... more We use a large sample of Kansas Farm Management Association farms for eight different crop/practice combinations (dryland and irrigated corn, sorghum, soybeans, and wheat) for 1994 through 2006 to evaluate the determinants of relative yield performance and explore the ability of financial variables to account for some of the remaining unexplained variation. Our hypothesis is that more financially sound farms should be able to implement better production techniques, thus have better yields. We further test whether decoupled payments can be used to enhance yield performance. Our hypothesis is that payments may be used to boost investment in inputs or equipment that can lead to better yields. Our results suggest this could be the case.
We use simulation methods in an expected utility maximization framework to analyze a farmer's... more We use simulation methods in an expected utility maximization framework to analyze a farmer's optimal resource allocation in the presence of government payments, decoupled and not. This framework is extended to incorporate the optimal choice of investment levels in the presence of credit constraints. Further extensions include a wealth-dependent interest rate and decreasing marginal yields. We find decoupled payments affect the optimal choices of the credit-constrained farmer through a collateral-enhancement effect, so they do distort production. The 2005 proposal by Senators Grassley, Dorgan, Hagel, and Johnson to tighten limits on commodity payments is not found to affect payments of the typical Kansas farmer.
This analysis considers two aspects of yield performance using a large sample of data collected f... more This analysis considers two aspects of yield performance using a large sample of data collected from individual U.S. farms. In the first, observable farm and operator characteristics are related to relative yield perofmance. In general, larger, more diversified farms have higher relative yields. In addition, more intensive use of productive inputs tends to be associated with higher yields. In a second segment of the analysis, we focus on the extent to which yield performance for different crops on a single farm tend to be correlated. Our results suggest that farms in major growing regions tend to have greater correlation of crop yields. In addition, larger, more specialized farms tended to have more consistent yield performance across crops. Implications for whole-farm insurance contracts are discussed.
This analysis utilizes farm-level data to evaluate the extent to which U.S. farm program benefits... more This analysis utilizes farm-level data to evaluate the extent to which U.S. farm program benefits, particularly the Agricultural Market Transition Act (AMTA) and market loss assistance payments, bring about distortions in production for wheat and barley production in the Northern Great Plains. The issue is important in light of the upcoming WTO negotiations and debate over the distortionary effects of such decoupled ("green-box") payments. Our results suggest that a modest, though statistically significant effect on acreage may have been evoked by AMTA payments. In particular,if the over $45 billion allocated to AMTA payments and market loss assistance had been doubled, wheat acreage may have been 7% greater and barley acreage may have been 12.8% higher. Models of land idling suggest that AMTA payments have a very modest effect on land idling in this region. We note that the nature of our data may result in an upward bias in AMTA and MLA payment effects, such that our anal...
We pursue two distinct approaches to measuring the stability and validity: of conventional approa... more We pursue two distinct approaches to measuring the stability and validity: of conventional approaches to measuring acreage response. Our focus is on corn and soybeans, which have perhaps been the most significantly: impacted of the main commodities by market and policy changes. As noted, much of the change impacting commodity markets has been triggered by bio-energy policies, with ethanol from corn being tlie most prominent renewable fuel targeted oy these policies. These policies have included ethanol tariffs and tax-credits for gasoline blenders. We first consider the structural stability of a standard acreage response model of the form often estimated in the empirical literature {see, for example, the seminal paper of Chavas and Holt {1990)). We apply structural change tests capable of identifying structural changes occurring at unknown break points and at the ends of a data series. The latter approach to testing is especially important in this am>lication since the most subst...
While in theory decoupled payments do not distort production decisions, in practice there are sev... more While in theory decoupled payments do not distort production decisions, in practice there are several potential coupling mechanisms for these payments. We use farm-level data from Kansas to revisit the issue of how (de)coupled are these supposedly "decoupled" payments by focusing on how they may impact production through credit constraints. In particular, we study how production effects may have differed across farmers with varying levels of debt pressure. Our empirical approach exploits the fact that we can observe the same farm over time (and so can account for the effects of time-constant omitted variables) to study how these payments affected total crop acres, owned acres, and the decisions to plant corn, sorghum, soybeans and wheat. Like previous studies, we find small production effects. Nonetheless our results suggest decoupled payments have potentially distortionary effects on production.
Favorable weather and the adoption of Genetically Modified (GM) corn hybrids are often argued to ... more Favorable weather and the adoption of Genetically Modified (GM) corn hybrids are often argued to be factors that explain recent corn yield increases and risk reduction in the U.S. Corn Belt. The focus of this analysis is to determine whether favorable weather is the main factor explaining increased and more stable yields or if biotechnology adoption is the more relevant driving force. The hypothesis that recent biotechnology advances have increased yields and reduced risks by making corn more resistant to pests, pesticides, and/or drought is tested. Fixed effects models of yields and crop insurance losses as functions of weather variables and genetically modified corn adoption rates are estimated taking into account the non-linear agronomic response of crop yields to weather. Preliminary results show that genetically modified corn adoption rates, especially insect- resistant corn adoption, have had a significant and positive effect on average corn yields in the U.S. Corn Belt over t...
The objective of this study is to evaluate and model the spatial dependence of systemic yield ris... more The objective of this study is to evaluate and model the spatial dependence of systemic yield risk. Various spatial autoregressive models are explored to account for county level dependence of crop yields. The results show that the time trend parameters of yields are correlated across spaces and the spatial correlations are changing with time. In addition, the spatial correlation of neighborhood in west/east direction is stronger than that of north/south direction. The information of the spatial dependence of yield risk will help the construction of better risk management programs for protecting producers from systemic yield risks.
We evaluate participation in the Conservation Reserve Program and its relationship with time allo... more We evaluate participation in the Conservation Reserve Program and its relationship with time allocation and farm structure. We do not find a statistically significant link between enrollment of acreage in the CRP program and off-farm work effort. We do find important linkages among time allocation and farm structure.
This article investigates the impacts of decoupled and coupled program payments on farmland renta... more This article investigates the impacts of decoupled and coupled program payments on farmland rental contract choices for a subset of U.S. crop farms using a principal-agent model. We consider cash and share contracts as well as hybrid contracts, which represent an increasingly prominent feature of U.S. agriculture. The conceptual framework suggests that restrictions on payments between contracting parties are ineffective and induce an offsetting contractual rearrangement. Empirical results from a multinomial logit model confirm that government support programs have large, significant effects on contract choices and that these effects vary by types of programs.
Previous research has ignored the influence of inputs on output risk when assessing the effects o... more Previous research has ignored the influence of inputs on output risk when assessing the effects of decoupled income-support payments on production decisions. This paper studies the impacts of agricultural policy decoupling on output variability and mean by explicitly considering the influence of agricultural input use on the stochastic component of production. We develop a theoretical framework that studies production responses of agricultural producers to apparently decoupled payments. Results show that, under DARA preferences, government transfers will have the effect of increasing production risk. Inferences on the effects of payments on output mean are also made. In our empirical application we use farm-level data collected in Kansas to illustrate the model.
Choices. The Magazine of Food, Farm, and Resources Issues, 2014
The farm program components of the 2014 Agricultural Act deserve careful, thoughtful, critical as... more The farm program components of the 2014 Agricultural Act deserve careful, thoughtful, critical assessments with respect to their potential economic benefits and costs, and their overall effects on economic welfare. Too often, perhaps, agricultural economists are accused of focusing only on the effects of farm programs on the farm and closely related sectors. However, any program should be evaluated in terms of its consequences for all of the individuals who are affected by the policies embedded in that program. These impacts are not simply limited to concerns about economic efficiency. As has been the case from the inception of debates over U.S. farm income and price support programs, equity concerns with respect to transfers of income are also important. These are the issues examined by a sequence of six articles in this new Choices theme: The 2014 Farm Bill: An Economic Welfare Disaster or Triumph?
An extensive empirical literature has examined the behavior of crop yields over time. Corn yields... more An extensive empirical literature has examined the behavior of crop yields over time. Corn yields have been characterized by signficant increases reflecting an array of technological developments that have substantially boosted productivity. While much of the focus has been on modeling deterministic and possibly stochastic trends in yields over time, an equally important question involves the extent to which yield changes may occur in response to price. This paper addresses two dimensions of this issue. We first look at the extent to which realized yields (i.e., at harvest) tend to be influenced by planting{time quotes of post{harvest futures contracts. Second, we examine the potential for intra{seasonal responsiveness of yields to significant price swings. The latter response is especially important in light of recent arguments that weather offers identification through instruments that are completely exogenous to market conditions; a view often expressed in terms of a "natura...
Agricultural and Resource Economics Review, 2012
Wind-borne diseases can spread rapidly and cause large losses. Producers may have little incentiv... more Wind-borne diseases can spread rapidly and cause large losses. Producers may have little incentive to prevent disease spread because prevention may not be welfare-maximizing. This study proposes a market-based mitigation program that indemnifies producers against disease-related losses and provides an incentive to neighboring producers to take preventive action, which can substantially mitigate infestations, reduce the likelihood of catastrophic losses, and increase social welfare. An equilibrium displacement model simulates introduction of the program for U.S. soybeans. Simulations reveal that the market-based solution contributes to minor market distortions but also reduces social welfare losses and could succeed for other at-risk commodities.
Journal of Agricultural and Applied Economics, 2008
We review the implications of the 2007 Farm Bill for the risk management dimensions of U.S. agric... more We review the implications of the 2007 Farm Bill for the risk management dimensions of U.S. agriculture and policy. Legislative proposals suggest significant changes in risk management policy, including the introduction of state or national revenue insurance. We also pursue an empirical analysis of the interrelationships of crop insurance, disaster relief, and farm profitability. We find an inverse relationship between disaster assistance and insurance purchases. Our analysis also suggests that farmers that buy insurance and that receive disaster payments tend to have higher returns to farming.
This paper examines the cross-hedge ratio between grain sorghum spot prices and corn futures pric... more This paper examines the cross-hedge ratio between grain sorghum spot prices and corn futures prices. Cross-hedging is used when two products are substitutes, and one does not have a futures market. A copula model with GARCH errors is applied to estimate the optimal hedge ratio. Hedging performance is measured by the reduction in the variance of portfolio. Results show that application of a copula model reduces risk more than the conventional method, such as an OLS model and a multivariate GARCH model.
We use a large sample of Kansas Farm Management Association farms for eight different crop/practi... more We use a large sample of Kansas Farm Management Association farms for eight different crop/practice combinations (dryland and irrigated corn, sorghum, soybeans, and wheat) for 1994 through 2006 to evaluate the determinants of relative yield performance and explore the ability of financial variables to account for some of the remaining unexplained variation. Our hypothesis is that more financially sound farms should be able to implement better production techniques, thus have better yields. We further test whether decoupled payments can be used to enhance yield performance. Our hypothesis is that payments may be used to boost investment in inputs or equipment that can lead to better yields. Our results suggest this could be the case.
We use simulation methods in an expected utility maximization framework to analyze a farmer's... more We use simulation methods in an expected utility maximization framework to analyze a farmer's optimal resource allocation in the presence of government payments, decoupled and not. This framework is extended to incorporate the optimal choice of investment levels in the presence of credit constraints. Further extensions include a wealth-dependent interest rate and decreasing marginal yields. We find decoupled payments affect the optimal choices of the credit-constrained farmer through a collateral-enhancement effect, so they do distort production. The 2005 proposal by Senators Grassley, Dorgan, Hagel, and Johnson to tighten limits on commodity payments is not found to affect payments of the typical Kansas farmer.
This analysis considers two aspects of yield performance using a large sample of data collected f... more This analysis considers two aspects of yield performance using a large sample of data collected from individual U.S. farms. In the first, observable farm and operator characteristics are related to relative yield perofmance. In general, larger, more diversified farms have higher relative yields. In addition, more intensive use of productive inputs tends to be associated with higher yields. In a second segment of the analysis, we focus on the extent to which yield performance for different crops on a single farm tend to be correlated. Our results suggest that farms in major growing regions tend to have greater correlation of crop yields. In addition, larger, more specialized farms tended to have more consistent yield performance across crops. Implications for whole-farm insurance contracts are discussed.
This analysis utilizes farm-level data to evaluate the extent to which U.S. farm program benefits... more This analysis utilizes farm-level data to evaluate the extent to which U.S. farm program benefits, particularly the Agricultural Market Transition Act (AMTA) and market loss assistance payments, bring about distortions in production for wheat and barley production in the Northern Great Plains. The issue is important in light of the upcoming WTO negotiations and debate over the distortionary effects of such decoupled ("green-box") payments. Our results suggest that a modest, though statistically significant effect on acreage may have been evoked by AMTA payments. In particular,if the over $45 billion allocated to AMTA payments and market loss assistance had been doubled, wheat acreage may have been 7% greater and barley acreage may have been 12.8% higher. Models of land idling suggest that AMTA payments have a very modest effect on land idling in this region. We note that the nature of our data may result in an upward bias in AMTA and MLA payment effects, such that our anal...
We pursue two distinct approaches to measuring the stability and validity: of conventional approa... more We pursue two distinct approaches to measuring the stability and validity: of conventional approaches to measuring acreage response. Our focus is on corn and soybeans, which have perhaps been the most significantly: impacted of the main commodities by market and policy changes. As noted, much of the change impacting commodity markets has been triggered by bio-energy policies, with ethanol from corn being tlie most prominent renewable fuel targeted oy these policies. These policies have included ethanol tariffs and tax-credits for gasoline blenders. We first consider the structural stability of a standard acreage response model of the form often estimated in the empirical literature {see, for example, the seminal paper of Chavas and Holt {1990)). We apply structural change tests capable of identifying structural changes occurring at unknown break points and at the ends of a data series. The latter approach to testing is especially important in this am>lication since the most subst...
While in theory decoupled payments do not distort production decisions, in practice there are sev... more While in theory decoupled payments do not distort production decisions, in practice there are several potential coupling mechanisms for these payments. We use farm-level data from Kansas to revisit the issue of how (de)coupled are these supposedly "decoupled" payments by focusing on how they may impact production through credit constraints. In particular, we study how production effects may have differed across farmers with varying levels of debt pressure. Our empirical approach exploits the fact that we can observe the same farm over time (and so can account for the effects of time-constant omitted variables) to study how these payments affected total crop acres, owned acres, and the decisions to plant corn, sorghum, soybeans and wheat. Like previous studies, we find small production effects. Nonetheless our results suggest decoupled payments have potentially distortionary effects on production.
Favorable weather and the adoption of Genetically Modified (GM) corn hybrids are often argued to ... more Favorable weather and the adoption of Genetically Modified (GM) corn hybrids are often argued to be factors that explain recent corn yield increases and risk reduction in the U.S. Corn Belt. The focus of this analysis is to determine whether favorable weather is the main factor explaining increased and more stable yields or if biotechnology adoption is the more relevant driving force. The hypothesis that recent biotechnology advances have increased yields and reduced risks by making corn more resistant to pests, pesticides, and/or drought is tested. Fixed effects models of yields and crop insurance losses as functions of weather variables and genetically modified corn adoption rates are estimated taking into account the non-linear agronomic response of crop yields to weather. Preliminary results show that genetically modified corn adoption rates, especially insect- resistant corn adoption, have had a significant and positive effect on average corn yields in the U.S. Corn Belt over t...
The objective of this study is to evaluate and model the spatial dependence of systemic yield ris... more The objective of this study is to evaluate and model the spatial dependence of systemic yield risk. Various spatial autoregressive models are explored to account for county level dependence of crop yields. The results show that the time trend parameters of yields are correlated across spaces and the spatial correlations are changing with time. In addition, the spatial correlation of neighborhood in west/east direction is stronger than that of north/south direction. The information of the spatial dependence of yield risk will help the construction of better risk management programs for protecting producers from systemic yield risks.
We evaluate participation in the Conservation Reserve Program and its relationship with time allo... more We evaluate participation in the Conservation Reserve Program and its relationship with time allocation and farm structure. We do not find a statistically significant link between enrollment of acreage in the CRP program and off-farm work effort. We do find important linkages among time allocation and farm structure.
This article investigates the impacts of decoupled and coupled program payments on farmland renta... more This article investigates the impacts of decoupled and coupled program payments on farmland rental contract choices for a subset of U.S. crop farms using a principal-agent model. We consider cash and share contracts as well as hybrid contracts, which represent an increasingly prominent feature of U.S. agriculture. The conceptual framework suggests that restrictions on payments between contracting parties are ineffective and induce an offsetting contractual rearrangement. Empirical results from a multinomial logit model confirm that government support programs have large, significant effects on contract choices and that these effects vary by types of programs.
Previous research has ignored the influence of inputs on output risk when assessing the effects o... more Previous research has ignored the influence of inputs on output risk when assessing the effects of decoupled income-support payments on production decisions. This paper studies the impacts of agricultural policy decoupling on output variability and mean by explicitly considering the influence of agricultural input use on the stochastic component of production. We develop a theoretical framework that studies production responses of agricultural producers to apparently decoupled payments. Results show that, under DARA preferences, government transfers will have the effect of increasing production risk. Inferences on the effects of payments on output mean are also made. In our empirical application we use farm-level data collected in Kansas to illustrate the model.
Choices. The Magazine of Food, Farm, and Resources Issues, 2014
The farm program components of the 2014 Agricultural Act deserve careful, thoughtful, critical as... more The farm program components of the 2014 Agricultural Act deserve careful, thoughtful, critical assessments with respect to their potential economic benefits and costs, and their overall effects on economic welfare. Too often, perhaps, agricultural economists are accused of focusing only on the effects of farm programs on the farm and closely related sectors. However, any program should be evaluated in terms of its consequences for all of the individuals who are affected by the policies embedded in that program. These impacts are not simply limited to concerns about economic efficiency. As has been the case from the inception of debates over U.S. farm income and price support programs, equity concerns with respect to transfers of income are also important. These are the issues examined by a sequence of six articles in this new Choices theme: The 2014 Farm Bill: An Economic Welfare Disaster or Triumph?
An extensive empirical literature has examined the behavior of crop yields over time. Corn yields... more An extensive empirical literature has examined the behavior of crop yields over time. Corn yields have been characterized by signficant increases reflecting an array of technological developments that have substantially boosted productivity. While much of the focus has been on modeling deterministic and possibly stochastic trends in yields over time, an equally important question involves the extent to which yield changes may occur in response to price. This paper addresses two dimensions of this issue. We first look at the extent to which realized yields (i.e., at harvest) tend to be influenced by planting{time quotes of post{harvest futures contracts. Second, we examine the potential for intra{seasonal responsiveness of yields to significant price swings. The latter response is especially important in light of recent arguments that weather offers identification through instruments that are completely exogenous to market conditions; a view often expressed in terms of a "natura...
Agricultural and Resource Economics Review, 2012
Wind-borne diseases can spread rapidly and cause large losses. Producers may have little incentiv... more Wind-borne diseases can spread rapidly and cause large losses. Producers may have little incentive to prevent disease spread because prevention may not be welfare-maximizing. This study proposes a market-based mitigation program that indemnifies producers against disease-related losses and provides an incentive to neighboring producers to take preventive action, which can substantially mitigate infestations, reduce the likelihood of catastrophic losses, and increase social welfare. An equilibrium displacement model simulates introduction of the program for U.S. soybeans. Simulations reveal that the market-based solution contributes to minor market distortions but also reduces social welfare losses and could succeed for other at-risk commodities.
Journal of Agricultural and Applied Economics, 2008
We review the implications of the 2007 Farm Bill for the risk management dimensions of U.S. agric... more We review the implications of the 2007 Farm Bill for the risk management dimensions of U.S. agriculture and policy. Legislative proposals suggest significant changes in risk management policy, including the introduction of state or national revenue insurance. We also pursue an empirical analysis of the interrelationships of crop insurance, disaster relief, and farm profitability. We find an inverse relationship between disaster assistance and insurance purchases. Our analysis also suggests that farmers that buy insurance and that receive disaster payments tend to have higher returns to farming.