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Current Topics:
2008 Farm Bill
Economic Efficiency
Soybean aphids in soybeans
Soybean aphids in seed potatoes
Farm Financial Management
Farm Transfer and Estate Planning
Extension Scholarship
Organic Food and Farming
2008 Farm Bill
Choosing between ACRE and Counter-cyclical payments
Starting with the 2009 crop year, the Average Crop Revenue Election (ACRE) program is a new, optional safety net for farmers provided by Congress in the Food, Conservation, and Energy Act of 2008 (commonly called the farm bill). The ACRE program is based on changes in crop revenue. It is an alternative to the counter-cyclical (CC) program which is based only on changes in crop prices. Farmers have to choose between the two programs; they cannot receive benefits from both. At first, farmers may find this safety net based on crop revenue appealing; however, making this choice is more complicated than it first appears. The complexities essentially take away any possibility to develop simple decision rules or breakeven prices for farmers to make the decision to choose between ACRE and CC. The attached factsheet and Excel worksheet are designed to help farmers understand the ACRE program and to help farmers make the choice between ACRE and CC by estimating payments under different views of the future.
Provisions and potential impacts of the Average Crop Revenue Election (ACRE) Program
Kent Olson and Matthew DalSanto. Staff Paper P08-7, Department of Applied Economics, University of Minnesota, St. Paul, MN, 2008.
Abstract: The Average Crop Revenue Election (ACRE) program is a new, optional safety net for farmers provided by Congress in the Food, Conservation, and Energy Act of 2008 (commonly called the farm bill). Choosing this new safety net is not an obvious choice. Farmers who choose to elect this program also must accept a 20% reduction in direct payments and a 30% reduction in marketing assistance loan rates. In this paper, we describe the general provisions and calculations of the ACRE and counter-cyclical payment (CCP) programs and present our estimates of potential payments under the two programs.
If prices are expected to remain at or above the ACRE price guarantee, CCP is the best choice since government payments are expected to be lower under the ACRE program—as shown in the first price scenario. However, if national market prices fall sufficiently, the ACRE program becomes the best choice since ACRE payments will be higher—as shown in the third price scenario. The national market price does not have to be much lower for ACRE to be the preferred choice—as shown for wheat-soybean farms in the third price scenario.
It is essentially impossible to describe simple rules of thumb or breakeven prices to help farmers decide whether to sign up for ACRE or stay with CCP. This difficulty is due to several factors: the complexity of the program rules, the requirement to sign up all program crops on a farm, the potential government payment for only one crop even though direct payments and loan rates are cut for all crops, the uncertainty of future prices and yields, and the variation in how an individual farm’s yields vary in relationship to its state yields.
Alternative Farm Bills: Impacts on Minnesota Farms
Kent Olson and Matthew DalSanto. Staff Paper P07-5. Department of Applied Economics, University of Minnesota, St. Paul, MN, 2007.
Abstract: With the current federal farm bill set to expire at the end of September this year, many proposals have been made to redesign the next bill. The objectives of this study are to compare the current policy with major proposed alternatives and estimate the potential payments of farmers under each of the alternatives. The alternative policies are compared in two ways. First a historical comparison of crop revenue and estimated government payments for individual farms are made under each proposal from 2002-2005. In a second comparison, projections of crop revenue and government payments are made using historical yields for each farm, county, and nation; historical price data; statistical distributions of the yields and prices including averages, standard deviations, and correlations; and each proposal’s rules for calculating payments. For yields, deviations from the yield trend are used. In three of the four years and on average, the American Soybean Association (ASA) proposal has higher payments and thus higher total gross revenue compared to current policy and the other three proposals. Since the ASA proposal raises both loan rates and target prices, the higher payments should be expected. The proposed USDA policy is estimated to have a slightly higher average government payment and total gross revenue compared to current policy, but it is not higher than current policy in each year. Lower total payments under the National Corn Growers Association (NCGA) proposal are due to higher than average revenues during 2002-05. The revenue insurance proposal does not create any indemnity payments in 2002-05 again due to the higher revenues in these years. Projections of potential revenue also show the ASA proposal to have higher estimated payments. Average government payments are estimated to be slightly higher under current policy compared to USDA’s and NCGA’s proposals. Since federal budget concerns may not allow the higher payments under the ASA proposal, the choice between the USDA and NCGA proposal may hinge on the level of administrative costs which would appear to be lower with the USDA proposal since it is based on one national estimate of revenue versus many county and individual calculations under the NCGA proposal. The potential use of multi-commodity revenue insurance will hinge on either the ability to provide additional support in fixed direct payments and green payments and larger federal budget concerns.
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Economic Efficiency
Ongoing work includes the following 2007 paper:
Economic Efficiency and Factors Explaining Differences Between Minnesota Farm Households
Kent Olson and Linh Vu, selected paper at the 2007 AAEA meetings.
Abstract: Factors explaining differences in economic efficiency between farms are of major interest to owners, managers, and other stakeholders as they strive to improve earnings and improve the chances of firm survival. This study is undertaken to improve our understanding of inter-farm differences in and opportunities to improve farm household efficiency in utilizing their land, labor, and capital resources to achieve household objectives. The technical, allocative, and scale efficiencies of farm households are estimated using a nonparametric, output-based data envelopment analysis (DEA) of a panel dataset from 1993-2006. Single and double bootstrapping procedures are used to estimate technical efficiency. Initial technical efficiency assuming variable returns to scale (TEV) is estimated to be 0.84. Using single bootstrapping, the average bias-corrected TEV estimate is 0.76; using double bootstrapping, the TEV estimate is 0.74. Scale efficiency is estimated to be 0.95. Allocative efficiency is estimated to be 0.72. Factors that are often associated with higher technical efficiency include larger farms, farms with lower debt to asset ratio, and farms with a higher percentage of nonfarm activities. The sign and significance of these three factors are robust across analysis methods as well as years.
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Soybean aphids in soybeans
The report from the 2007 survey of farmers will be available soon.
The draft of the abstract is included here:
In response to the introduction and rapid spread of soybean aphid as a major new invasive pest of soybean in North America, a multi-state project, "Soybean Aphid in the North Central US: Implementing IPM on a Landscape Scale", was initiated to help transition the North Central US soybean industry to a sustainable and ecologically-based IPM system for soybean aphid. As part of this project, farmers were surveyed about their treatment of and knowledge about soybean aphids for crop years 2004, 2005, 2006, and 2007. Farmers were surveyed at winter meetings for 2004-2006; a mailed survey was used for 2007. Thirteen percent, 84%, 35%, and 89% of the farmers indicated they had treated for soybean aphid in 2004, 2005, 2006, and 2007, respectively, and the averages of their soybean acreage treated were 50%, 87%, 81%, and 43%, respectively.
Overall, the farmers showed a fairly good understanding of soybean aphids and their impact on soybeans. Over 80% said soybean aphids could be treated and repopulate in the same crop year. For 2004-2006, at least 75% of the farmers said aphids damaged their soybeans by sucking sap. However this percentage dropped to 59% for 2007 with a greater percentage pointing at a combination of damage methods. This lower percentage for 2007 may be due to a broader, randomly selected sample of farmers who received the surveys by mail versus farmers who attended meetings in the first three years. However, even though fewer seemed to have a clear understanding of how aphids damage soybeans, other measures indicate a stable or improved understanding of soybean aphid biology and control.
Over 70% said the frequency with which aphids should be treated for profitable control depends on aphid counts, weather conditions and plant growth stage. About a third of the farmers believed that aphids inflict the most damage during early flowering through pod set (R1-R3); however, about a third also thought aphids could inflict the most damage at any stage.
Over half the farmers considered the lowest aphid density for profitable aphid control to be 250 aphids per plant. Over 80% said scouting reports were very important for making a decision to treat for aphids; just over half the farmers said plant growth stage was also very important.
The percentage of farmers who said they had adopted most university IPM recommendations for soybean aphids declined to 33% in 2007 compared to about half in the earlier years. This drop may be due to an actual decline in adoption or due to either a greater awareness of more IPM recommendations or the different survey method and sample in 2007. Although they varied from year to year, other measures and responses did not show a strong trend up or down over the survey years as did the farmers’ understanding of the damage method and the IPM adoption rate.
Although the survey shows opportunity for continued education (damage methods and plant growth stage vulnerability, for example), the surveys showed farmers to have a good knowledge already. This may be due to the quick coverage of the soybean aphid as a new pest in University and private sector advisors and the popular media doing a very good job of education in the very early years of the soybean aphid infestation. Farmers’ attention may have been heightened due to the soybean aphid being a new, potentially very damaging pest.
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Soybean aphids in seed potatoes
Border Treatment to Reduce Insecticide Use in Seed Potato Production: Biological, Economic, and Managerial Analysis
Carroll, Matthew W; Radcliffe, Edward B; MacRae, Ian V; Ragsdale, David W; Olson, Kent D; Badibanga, Thaddee. 2008, American Journal of Potato Research, In Press.
Abstract: Worldwide, Myzus persicae (Sulzer) is considered the key vector of potato leafroll virus (PLRV). In the northern Great Plains, introduction of PLRV into seed potato fields is coincident with mid-summer dispersal of winged M. persicae from local crop and weed hosts. Initial colonization of potato fields tends to occur at field margins. In 2003, experiments were conducted in 23 seed potato fields to evaluate effectiveness of targeted methamidophos applications for M. persicae control. These applications provided excellent control (>94%) of colonizing aphids in the borders, slowed subsequent within field spread, and necessitated treatment of 95% fewer hectares than would treating entire fields. Across entire fields, control costs averaged $4.22 per ha for border treatments compared to a hypothetical $58.91 per ha for applying methamidophos to entire fields. Thus targeted insecticide applications can provide effective M. persicae control in seed potato fields while greatly lowering insecticide use and application costs overall.
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Farm Financial Management
Off-Farm Income and Farm Capital Accumulation: A Farm-Level Analysis
Lagerkvist, C.J., Larsen, K., and Olson, K.D. 2007, Agricultural Finance Review, 67:241-257.
Abstract: An intertemporal model in which farm capital accumulation and work choices by a single-agent farm household are interdependent is developed and tested using a farm-level data set. Estimation is done using a recursive two-step simultaneous censored equations model. The results of this study are of relevance for an understanding of structural change within the agricultural sector as they point toward the emergence of a dual farming structure and rigidity in off-farm work adjustments. Our findings suggest that off farm income reliance is associated with a farm asset disinvestment strategy, that there is rigidity in off farm income reliance, and that factors explaining farm capital growth indirectly affect the off farm reliance.
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Farm Transfer and Estate Planning
Farm Transition and Estate Planning: Farmers’ Evaluations and Behavioral Changes Due to Attending Workshops
Hachfeld, Gary, David Bau, C. Robert Holcomb, James Kurtz, J. William Craig, and Kent Olson. 2008, Journal of Extension. Forthcoming 2008.
Abstract: A majority of Minnesota farm families have not named a farm business successor nor have they developed an up-to-date farm business transition and personal estate plan. This collaborative Extension program effort focuses on introducing farm families to business transfer and estate planning processes, enabling them to develop and implement such plans. Findings suggest that farm family participants gained increased understanding of farm business transfer and estate planning. Furthermore, a substantive percentage of participants reported completing and implementing a business transfer and personal estate plan as a result of attending a program seminar.
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Extension Scholarship
Extension Educators' Views of Scholarship and Performance Evaluation Criteria
Olson, K. D., Skuza, J. A., Blinn, C. R. 2007, Journal of Extension [On-line], 45(4) Article 4RIB1.
Abstract: In response to an organizational goal of increasing scholarship, a survey of faculty and staff in the University of Minnesota Extension Service was conducted to better understand how they define scholarship, its extent of use in their everyday work, and its importance within performance evaluation. While Regional Extension Educators strongly believe they should enhance their scholarship, they also believe that it should not occur at the expense of program management, delivery, and development. In fact, they saw those factors as being more important in performance evaluations than scholarship.
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Organic Food and Farming
Organic Food: Consumers' Choices and Farmers' Opportunities
Canavari, Maurizio, and Olson, Kent D., editors. 2007, Springer.
A comparative profitability analysis of organic and conventional farms in Emilia-Romagna and in Minnesota
Canavari, Maurizio; Ghelfi, Rino; Olson, Kent D.; Rivaroli, Sergio. 2007. IN: Organic Food: Consumers' Choices and Farmers' Opportunities, edited by Maurizio Canavari and Kent D. Olson. Springer, 2007, pp.31-45. 2007.
Current issues in organic food: United States
Olson, Kent D. 2007. IN: Organic Food: Consumers' Choices and Farmers' Opportunities, edited by Maurizio Canavari and Kent D. Olson. Springer, 2007, pp.185-193, 2007.
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